JSW Steel has cut production at its Vijaynagar plant to 30 per cent of original levels from Saturday, on the back of a stoppage of iron ore supply. Its largest plant in the country, Vijaynagar has a production capacity of over 10 million tonnes a year.
“The abrupt disruption of supplies to JSW Steel (a long-term customer) by NMDC cut the lifeline to run the furnaces in safe condition. The Apex Court's directive to supply 1 million tonne per month to steel industry by NMDC even after a lapse of 50 days is yet to be fulfilled,” the company said in a statement.
NMDC supplies
The company's move comes after the Supreme Court in July directed that all mining in Bellary, Karnataka, be stopped on allegations of rampant illegal mining in the region. In August, however, the apex court ordered State-owned miner NMDC to release 1 mt a month of iron ore to cover the raw material crunch faced by the steel makers.
A further release of 1.5 mt a month of ore by e-auction through a Monitoring Committee was also sanctioned vide a court order dated September 2.
“This measure has not given any relief as 31 per cent of the total auctioned material was not bought by any of the participants in the e-auction due to improper pricing for low grade ore. Further, out of the balance 69 per cent, only 10 per cent was dispatched to the industry till date due to several procedural delays,” JSW Steel said.
It added that the “artificial scarcity of material” may lead prices of raw material increasing to unnatural levels and that continuing steel production even at current levels would be very challenging.
“The impact will be high on JSW Steel as though the demand is low right now, the weak quarters are going away and we expect it to rise in the second half. From October demand will pick up and because we're a net importer of steel, a drop in supply will result in higher imports,” said a sector analyst from a leading brokerage firm.