Sajjan Jindal-led JSW Steel, India’s third-largest steel maker, on Tuesday threatened to trigger a price spiral following a crunch in iron ore supply which might force it to shut its showcase 10-million tonne per annum Vijaynagar plant in the Bellary district in Karnataka.
The plant, which accounts for over 70 per cent of JSW Steel’s installed steel-making capacity, is running at 30 per cent capacity since NMDC cut long-term supplies to the plant following a Supreme Court order last week. Only one of the six blast furnaces at the plant is operational. “If the current situation continues, we may have to shut down the plant which is already running at its minimum technical capacity of 30 per cent,” Jindal told media persons. Asked about the extent of impact on the margins of the Rs 25,000 crore company, he said, “The question now is not of margin. It is now a question of survival.”
The steel tycoon said raw material crunch would have wide impact on prices and demand of steel. “Steel prices are likely to go up quite a bit because the largest steel plant is going to shut down. These increased prices will further have an impact on inflation. Steel imports will also have to take place to meet domestic requirement.”
The Supreme Court had, in July, imposed a blanket ban on mining in the main iron ore producing district of Bellary following reports of large scale illegal mining and environmental violations. The ban was later extended to two more districts — Tumkur and Chitradurga — bringing production of the mineral to a grinding halt.
As a relief measure, however, the apex court had last month allowed state-owned miner NMDC Ltd to mine one million tonnes of iron ore every month. It had also ordered liquidating 25 MT iron ore stocks in the region through auctioning. Following the order, the miner had cut existing long-term supplies.
Jindal was also not happy with the court’s relief measures arguing that they are not adequate.
“Though the honourable Supreme Court has made a plan which is being put in place, but it is a very slow process. Two months have already passed and the situation is becoming more and more complicated and difficult.”
