Marred by inferior quality of iron ore, JSW Steel today reported a decline of over 24% in steel production for February at 6.10 lakh tonnes (LT) compared to the January production level of 8.05 LT.
However, on an year-on-year basis, the company's production was up by 12.75% in February, while for the first 11 months of the fiscal, the Sajjan Jindal-led company had produced 6.77 million tonnes of the metal alloy, up 15%.
"The crude steel production during February 2012 was severely impacted due to usage of inferior grades of iron ore," company's Joint Managing Director and CFO Seshagiri Rao said in a statement.
He added that quality of iron ore being offered in the Supreme Court mandated E-auction is deteriorating "substantially" as the raw material stock of 25 million tonnes is getting exhausted.
"Further certain iron ore in E-auctions contained high Alumina, Silica, Manganese and Low Fe, which led to poor Sinter quality, high slag formation and low productivity in the Blast Furnaces (in February)," Rao said.
The company had cut down its production levels by up to 70% in the second half of the last year due to iron ore crunch in Karnataka, following a Supreme Court ban on mining in the state.
However, it had reported a rise of 19% in production for the October-December quarter to 19.39 lakh tonnes, when iron ore supplies started improving.
According to the JSW statement, the quality of iron ore, sold through Supreme Court-mandated E-auction route, is deteriorating as the stock of 25 million tonnes in Karnataka is getting exhausted.
Besides, availability of raw material is also not in tune with the demand and only 1.17 MT of ore was sold last month through the auction route against the industry requirement of 3 MT.
"Steel industry in Karnataka region, therefore, is not only facing shortage of iron ore but poor quality of iron ore is impacting the equipment, productivity and efficiency," it added.
The company also said that it is expecting a Supreme Court permission on mining "at least" in clean or the category-A mines in Karnataka, as recommended by the apex court appointed Central Empowered Committee (CEC).
The CEC, in its final report, which was submitted to the apex court last month, had recommended to cap iron ore mining in the state to 30 MT annually and allow mining in the 45 mines cleared of any wrong doing as soon as the ban is lifted.
JSW shares were down 3.14% to Rs 761.50 apiece on the BSE in the late afternoon trade.