JSW Steel, part of the $10-billion OP Jindal group, has been badly hit by the Supreme Court’s ban on mining of iron ore in three Karnataka districts. However, the crisis is expected to ease soon, chief executive officer Vinod Nowal told Sudheer Pal Singh. Edited excerpts:
With the iron ore availability in Karnataka deteriorating, what is your stock position?
We are in a hand-to-mouth situation. We have only five to seven days of inventory left to operate the Vijaynagar (Bellary) plant. The plant is operating at 70-80 per cent capacity.
What is your strategy to counter this supply crisis?
The Supreme Court’s decision also says the available stocks of 25 mt in Karnataka have to be liquidated to meet industry’s immediate demand. That supply will become available in 10-15 days. To tide over, we will manage to meet demand by sourcing from other states.
What are the alternative arrangements? How much has the cost gone up?
This is a big concern for us. We have a daily iron ore requirement of between 45,000 tonnes and 50,000 tonnes if it is high grade and up to 60,000 tones if we source low grade ore. We are buying from three states, though logistics is a problem and the cost has gone up. Also, availability is very tight. We are buying from Chhattisgarh and Jharkhand, and now from from Orissa, too. These states are meeting our requirement of around 20,000 tonnes a day at an overall landed cost of more than Rs 4,000 a tonne. The overall cost of production has gone up by Rs 2,000 per tonne but there is no option. The price at which we are buying from the other states are the export prices.
Are your plans to expand the Vijaynagar plant’s capacity by an additional two mt likely to be hit?
No. This is a very temporary phase and will end soon. In fact, it may give some good results, too. The outcome of this could be good for the industry. The SC intervention will help in cleaning up the system but initially we have to face tough times and we are prepared for that.
Is a shutdown of the Vijaynagar plant likely?
Not at all. Supply from NMDC has come as a big relief for us, after the court allowed the company to supply one mt every month. We are getting 70 per cent of what NMDC is supplying in the region.
JSW Steel’s turnover grew 29 per cent to Rs 25,000 crore in 2010-11. Do you foresee any impact on this year’s target?
So far, we are sticking to all our targets, as we think the current supply crisis is temporary.
