JSW Steel’s Karnataka based plant of 10 MnT pa capacity will run below the capacity owing to mining restrictions in the state, leading to severe Iron ore shortage.
Senior officials of JSW have expressed their concern on poor capacity utilization of its main plant at Karnataka. The plant will not be operable for more than 80 per cent capacity in the near future.
It is worth noting that Iron ore is a key feedstock in Steelmaking & related by-products, so issues in sourcing Iron ore will lead to sluggish production. It will also affect plans to increase annual capacity to 40 MnT in the next decade. This is also pulling out ArcelorMittal SA & Posco from the projects, hence disrupting India’s Steel production ambitions.
“After having invested here, there is no way you can plan to get Iron ore from outside of Karnataka (on a long term basis)”, said Seshagiri Rao, Joint Managing Director, JSW.
Iron ore mining restrictions are meant to curb illegal mining. Moreover, delays in getting various statutory approvals are resulting in declined Iron ore production. It is expected to be only 18 MnT this fiscal against the state’s requirement of 40 MnT.
JFE Steel is the second biggest shareholder of JSW & world’s ninth largest steel company. It will have to wait for supply in Karnataka, to improve to raise the plant’s capacity from 70-80 per cent currently.
Despite facing problems concerned to mining ban & delays in the clearance production is expected to get the pace. Karanataka government petition with SC indicates the expectation to raise Iron ore production to 22.18 MnT by March 2015. Owing to shortage of Iron ore & poor capacity utilization at around 81 percent last fiscal, India became a net steel importer for at least the fourth straight year.
Still hoping for the best, it is expected that situation may improve this year, as the SC in April 2013, lifted mining ban in Karnataka conditionally, though some mines have resumed.
India possesses a capacity of around 90 MnT but produced 77.6 MnT of Steel last fiscal year. Though India is aiming high, it is Asia’s third-largest economy, the world’s fourth largest producer of steel. It is targeting a capacity of 142.3 MnT by 2017 and 300 MnT by 2025.
Indian government may be taking appropriate action in order to avoid delays, but it’s not working perhaps. The leading steelmakers such as ArcelorMittal & South Korea’s Posco are to pull out of two projects having combined planned capacity of 18 MnT pa, owing to such delays concerned to statutory clearances. Moreover, JSW is looking to buy Stemcor’s Odisha based BRPL, to ensure steady supply of Iron ore. But, final date for bidding is extended to 6 Jan 2014.