JSW Steel and Others in India Taking Big Hits from Mining Bans – Part Five

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MetalMiner welcomes guest contributor Rahul Jalan, a Chennai-based senior research analyst in metals for Beroe, Inc. who tracks the global steel and rare earths supply chain and analyzes global procurement developments to help develop procurement solutions for the company. Beroe specializes in providing procurement intelligence for a broad swath of industries, enabling buyers’ decision-making.

Previous posts in the series: Part One, Part Two, Part Three, Part Four

The shortage of iron ore supply has to led to complete closure of a few steel plants such as Tata Metaliks, and many plants such as JSW and Kalyani Steels are running at less than 50% capacity utilization. The ongoing iron ore shortage, along with China’s new regulation to only use high-grade iron ore, has created severe panic across the country as iron ore exporters reduced their shipments to China — the major importer of India’s low-grade iron ore fines. Most Indian steel companies have sinter plants that consume high-grade iron ore (lumps), but only a few that can also consume low-grade iron ore (fines).

JSW Steel has a long-term contract for 50 percent of its iron ore supplies — roughly 25 million tons — from the Bellary-Hospet region, and has small purchasing agreements for 20 percent of iron ore supplies from Chitradurga and for 30 percent with NMDC and Mysore Minerals Ltd.

JSW Steel has long-term contracts with NMDC and has also bought some amounts of iron ore through the e-auction that’s what is helping them run at about 50-65% capacity utilization — and the company is looking at possibilities of making alternate arrangements for iron ore from Orissa and Jharkhand.

Tata Metaliks (a subsidiary of Tata Steel), India’s largest producer of foundry-grade pig iron and supplier to automobile and engineering companies, used to procure more than 80 percent of its iron ore from Bellary-Hospet. The company has shut down its operation and is currently looking for a potential buyer to sell off the plant.

Kalyani Steel supplies steel to all major Indian auto companies like Tata Motors, Mahindra & Mahindra and Maruti Suzuki, and sources most of its ore from Bellary-Hospet. The company uses 650,000 tons of iron ore to produce 1.1 million tons of steel annually and has recently restarted its plan after a month’s closure. Kalyani has gotten a few of its iron ore supplies recently through the e-auction process and also some through NMDC, helping them avoid completely shuttering the plant and running at 35-50% capacity.

Kirloskar Ferrous Industries, producer of foundry-grade pig iron, sources 1 million tons of iron ore a year to produce 400,000 tons of pig iron mostly from Bellary-Hospet, and supplies castings to leading auto companies including Tata, Mahindra & Mahindra and Eicher Motors. The company is only able to operate one of two blast furnaces at less than 40% capacity utilization.

The government is all set to raise the export duty on iron ore from the existing 10 percent to 25 percent to make sure that most of the iron ore mined within the country easily meets the domestic steel industry’s demand.

–Rahul Jalan

Comment (1)

  1. Rdada says:

    its all just news copy & pasted…whats conclusion??

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