India’s largest steel plant, the 10-million tonne per annum Vijaynagar Steel plant in Karnataka, may see a temporary shut down if raw material supplies to it do not improve, JSW Steel said on Tuesday.
JSW Steel, India’s thirdlargest steelmaker has been facing acute shortage of iron ore, a key raw material in steel making, after an order by the apex court last month banned mining in key districts of Karnataka. JSW is still dependent on merchant miners as it does not have captive raw material linkages unlike competitors such as Tata Steel and SAIL.
“We may have to shut entirely (Vijayanagar plant). There is a good possibility of that (closure) if the situation does not improve,” said Sajjan Jindal, vice chairman, JSW Steel. “We don't have any inventory. We are running the unit at 30% capacity and managing to source iron ore from here and there. Chattisgarh and Orissa, which is too costly. It is pretty unfortunate.”
The court had given permission to India’s largest iron ore miner National Mineral Development Corporation (NMDC) to extract and sell 1 million tonne of ore every month and supply it to steel makers who are dependent on raw material from the state. But in another ruling last Friday, it ordered the state run firm to sell ore through e-auction resulting in the firm slashing supplies to steel companies like JSW. The ruling stood irrespective of the long-term supply agreements that NMDC may have had with various steel units in the state.
“Steel prices are likely to go up quite a bit because the largest plant of the country is being shut down.It will have an impact on inflation and steel imports will have to take place to continue to meet the domestic requirement,” said Jindal. “I can not tell you right now by how much, but it's obvious.”