We are optimistic of 90% capacity utilisation: Vinod K Nowal

Interview with Deputy managing director, JSW Steel

JSW Steel part of the OP Jindal Group, is looking at returning to normal production levels at its Vijayanagar steel plant in Karnataka's Bellary district. Though the supply of iron ore is still not regular in the state, JSW Steel, the single largest private sector investor in Karnataka, is optimistic of returning to higher steel production levels in FY14, deputy managing director Vinod K Nowal tells Mahesh Kulkarni. Edited excerpts:

With lower availability of iron ore, you achieved 70-80 per cent capacity at your Karnataka plant in FY13. With the Supreme Court allowing mining in some mines in Karnataka, do you see the supply situation improving this year?

Today, the Supreme Court has fixed the limit of iron ore production at 30 million tonnes (mt) per annum in Karnataka. As per the current availability, Category A mines will give about seven mt and Category B mines will give another seven mt by the end of this year. Though NMDC has permission to produce 12 mt per annum, it's able to supply only about 9-10 mt. So, the total availability is about 24 mt as against the steel industry's total requirement of 35 mt to achieve 16 mt per annum in Karnataka. JSW has been buying over 60 per cent of the total material put on auction.

As the supply of iron ore is set to improve, do you see rise in production of steel at your Karnataka plant?

Today, we are producing 8.5 mt HR coil flat products and 1.5 mt long products. Further value addition for automotive grade steel is on the way. JSW has decided to produce automotive grade steel this year in collaboration with JFE of Japan. By August, we will commission our new cold rolled mill with a capacity of 2.3 mt. Our capacity will go up to 12 mt this year. And we are optimistic of achieving 85-90 per cent capacity utilisation this year.

To achieve 90 per cent capacity utilisation, what is the requirement of iron ore at the Vijayanagar steel plant in Karnataka?
JSW Steel requires about 17 mt of iron ore with 63 per cent Fe grade for the current capacity of 10 mt of steel production. Assuming this grade is not available, we require about 20 mt of ore with 55 per cent Fe grade. Our capacity will go up to 12 mt by the end of this year. In 2014-15, we will need about 24 mt with 55 per cent Fe grade.

What is your strategy to source the required raw material to achieve the target this year?

As of now, we are dependent on e-auctions in Karnataka to source the raw material. We are also looking at sourcing iron ore from Odisha and Chhattisgarh in limited quantity. We will bring about two-three mt of iron ore this year from these states. We are also waiting for the monitoring committee to put on auction about seven mt of low-grade dumps. We are hopeful of buying maximum quantity as we have set up a 20 mt capacity benefication plant. We are planning to use low-grade iron ore with up to 46 per cent Fe this year and beneficiate it to our requirement.Apart from this, we are also looking at the option of acquiring captive mines from Category C mines that will be reallotted by the state government. We are currently awaiting the guidelines from the state government on Category C mines. We will bid very seriously as and when the state government comes up with the allotment process.

What would be the cost of sourcing from other states?
The cost of sourcing from these states will be relatively higher than the material in Karnataka. We will have to pay an additional Rs 2,600 per tonne by way of freight charges compared to the material available locally in the state.