The Karnataka steel industry has a reason to cheer. Last Friday, the Supreme Court in a ruling allowed auction of 1.5 million tonne of iron ore a month.
JSW Steel, the biggest player in the region, expects to go back to 80 per cent capacity utilisation once the auction begins.
Jayant Acharya, director (sales and marketing), JSW Steel, admitted the units in the state were under pressure.
"There is a shortfall of the raw material and we are looking at all options to source. We are hopeful once the auction begins, we will be back at 80 per cent," he said.
The company is sourcing ore from areas as far as Chhattisgarh, putting pressure on the freight costs which in turn is squeezing its profitability.
The total steel production in the country is 66 mt and Karnataka produces 16 mt. It requires 2.7 mt of ore every month. After the Supreme Court's order to halt mining in Bellary, Chitradurga and Tumkur districts in Karnataka, steel production suffered a massive blow. Some smaller steel plants even had to down shutters.
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Sesa Goa, a part of the London-listed Vedanta Resources Plc, closed its Chitradurga iron ore mine, which contributed 25 per cent to its total production.
The apex court, however, allowed state-owned miner NMDC to mine 1 mt of ore every month and sell it to the local steelmakers. The miner is currently ramping up production at its Bellary mine and is expected to peak in four or five months.
An official from the Federation of Indian Minerals and Industries, the body which looks after the needs of the local mining industry in the country, welcomed the temporary relief.
“Curbing illegal mining is necessary. Also, the ore lying in the stockpiles should be sold," he said.
FIMI is concerned about the small miners in the unorganised sector.