The shortage of iron ore seems to have hit steel companies in the small and medium segments the hardest. According to recent data by the Joint Plant Committee, the non-alloy and carbon steel segment saw a fall of 2.1 per cent in production in the April-November period. Overall, the decline in production stood at 1.6 per cent. Total production in the segment stood at about 27 million tonnes (mt), a little more than the combined output of the ‘main’ and ‘major’ producers.
“We are operating at 60-65 per cent capacity and given the demand, we should operate at 80-85 per cent. But iron ore shortage is holding us back. We normally source iron ore for our plant in Bengal from Odisha. But now, the state has decided to reserve 50 per cent ore for domestic industries,” said Jai Balaji Group Managing Director Aditya Jajodia. Jai Balaji's capacity stands at one mt, most of which is accounted for by Bengal.
Bengal doesn’t have iron ore; most units in the state source ore from Odisha. The Odisha government's latest diktat on reservation of ore for domestic users has added to the woes of companies such as Jai Balaji.
| FALLING SHORT Finished steel production (provisional) during April-November | |||
| Producers | 2011-12 | 2012-13 | % change |
| SAIL | 6,125 | 6,564 | 7.2 |
| RINL | 1,829 | 1,722 | -5.9 |
| Tata Steel | 3,615 | 3,937 | 8.9 |
| Main producers | 11,569 | 11,223 | 5.7 |
| Essar | 4,104 | 3,922 | -4.4 |
| JSW Ispat | 2,003 | 2,279 | 13.8 |
| JSW Steel | 6,106 | 7,554 | 23.7 |
| JSPL | 808 | 753 | -6.8 |
| Major producers | 13,021 | 14,508 | 11.4 |
| Others | 29,943 | 29,472 | -1.6 |
| Imports | 4,203 | 5,101 | 21.4 |
| Exports | 2,715 | 3,302 | 21.6 |
| Real consumption | 46,478 | 48,439 | 4.2 |
| Figures in ‘000 tonnes Source: Joint Plant Committee | |||
While the clampdown in Goa has hit exports, those in Karnataka and Odisha have primarily hit domestic steel players. The woes are not restricted to availability alone; an overall shortage in the market has raised prices.
“Lump ore prices range between Rs 4,500 and Rs 7,500 a tonne, while globally, prices are hovering at $100-$105 a tonne,” said Jajodia, who sources ore from private miners. Jai Balaji's woes are representative of the hurdles faced by plants in the small and medium enterprises segments.
The government's bid to curb illegal mining has resulted in a steep fall in iron ore production. From 208 mt in 2010-11, production is expected to fall about 100 mt this year. Provisional figures from the Indian Bureau of Mines indicate production during April-September stood at 72 mt.
The overall production of ‘main’ producers, including Steel Authority of India Limited (SAIL), Rashtriya Ispat Nigam and Tata Steel, however, has risen 5.7 per cent, while that of 'major' producers (Essar, JSW Ispat, JSW Steel and JSPL) has increased 10.2 per cent.
SAIL and Tata Steel are insulated from raw material shortage, as these companies have captive mines. JSW Steel, which has a plant in Karnataka, has seen its production rise 22.4 per cent. A company official, however, said while capacity had increased to 11 mt this year from 7.8 mt, the plant was running at lower utilisation, owing to increased capacity. Currently, JSW Steel’s capacity utilisation stands at 70 per cent.
According to the Karnataka Iron and Steel Manufacturers' Association (Kisma), at 80-85 per cent capacity utilisation, the total iron ore requirement of the iron and steel industry in the region is about 33 mt a year. The association claims on an average, integrated steel plants are running at 68 per cent capacity, while sponge and pig iron units are running at 27 per cent and 21 per cent, respectively.
Among the major producers, Essar Steel saw a decline of 4.4 per cent in production, while JSPL saw a 6.8 per cent fall. Rashtriya Ispat Nigam's production fell 5.9 per cent. However, this was due to factors other than raw material shortage. “Andhra Pradesh has been going through a severe power shortage, which affected our plant. However, it’s likely to ease in November,” said A P Choudhary, chairman and managing director, Rashtriya Ispat Nigam.
