JSW Steel raises ore sourcing from outside Karnataka

For the first nine months of the current financial year, JSW Steel has produced 9.03 mt of crude steel

 

 

Even as the supply of iron ore is yet to be streamlined in Karnataka, JSW Steel is trying hard to achieve its production goals for 2013-14. The company is increasing its raw material sourcing from outside Karnataka to achieve the target of 12 million tonnes (mt) of crude steel this financial year.

The company planned to sell 11.5 mt for 2013-14. It sold 9 mt in 2012-13. For the nine-month period of the current financial year, it has produced 9 mt.

Though the company requires five mt of ore for the fourth quarter to produce 3 mt, it can procure 4 mt from e-auctions in Karnataka. However, it is planning to bring the remaining quantity from outside.

“We are on our course to meet the guidelines for the financial year. We have put in place a plan to source raw material from Chhattisgarh, Jharkhand and Odisha. We are buying an average 300,000 tonnes every month,” Vinod K Nowal, deputy managing director, said.

In April-December, JSW Steel had achieved 7.2 per cent growth in its production at 9.03 mt against 8.42 mt a year ago.

For the January-March quarter, Karnataka is expected to auction seven mt, including three mt of sub-grade ore with iron content ranging between 40 and 50 per cent. JSW Steel was optimistic about procuring 70 per cent of the raw material, he said.

JSW Steel has a capacity of 14.3 mt from its three plants. The plant at Salem in Tamil Nadu has a capacity of one mt a year while the Dolvi plant in Maharashtra has three mt and the Vijayanagar one in Karnataka has 10 mt capacity.

“With five mt of ore available in the fourth quarter from Karnataka and other states, we will produce in excess of 12 mt for the financial year,” Nowal said.

However, the company is operating only at 80 per cent of the capacity at Vijayanagar in Bellary district. The company is sourcing ore from Odisha, Jharkhand and Chhattisgarh besides importing ore for its Dolvi and Salem plants. It is, however, left with little option to source the raw material for its Karnataka plant.

Meanwhile, the operating margins are under pressure due to the high cost of raw materials. It is forced to bid for the ore in e-auctions at double the market price. As against Rs 2,450 a tonne of ore loaded onto the wagon in Odisha, the company is paying Rs 4,000 a tonne at e-auctions in Karnataka. In addition, it has to a pay royalty, value-added tax and freight charges for the ore bought in the auctions.

“Our margins are under pressure due to the high cost of raw material in Karnataka. The private miners and NMDC are charging double the price for their material. We have requested the Karnataka government to end the monopoly and ensure an adequate supply of quality ore,” Nowal added.