How Much More Iron Ore Supply Coming Online–And How Long Will It Take?

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Continued from Part One.

Whatever the final figure of new iron ore supply coming online, there’s no doubt that it will boost the overall steel production capacity of Karnataka. The total iron ore requirement of Karnataka itself is about 40 million tons per year but the court had capped the maximum production at 30 million tons.

Steel producers say the Supreme Court’s order had come at the right time since the Indian economy was expected to get back to growth mode. The optimistic folks among them said it would greatly reduce India’s recent dependence on ore imports, though nobody wants to hazard a guess on the numbers for now.

According to a report in The Economic Times, the Federation of Indian Mineral Industries was of the opinion that even after Supreme Court permission, iron ore availability would ease only partially because mining companies would not find it easy to comply with the regulatory norms.

In the group’s opinion, an additional 10 million tons will be available in the immediate future. But the steel industry agreed overall that iron ore supply, as well as its quality, would improve, pushing prices down.

Kalyani Steel’s Managing Director R.K. Goyal said it would take up to two years for all these mines to come on stream. He felt no more than 24 million tons would be available.

Another report in the Business Standard noted that for companies such as JSW Steel, which were underutilizing their steel manufacturing capacity due to lack of iron ore availability, the court ruling would come as a breather. JSW is the largest steel producer in Karnataka.

Even for its on-going steel production, JSW Steel was outsourcing part of its requirements from other Indian states at a higher cost, due to non-availability of iron ore in Karntaka. The true impact of the re-opening of the mines, analysts feel, would only be seen in the fourth quarter of 2014.

The lifting of the ban on Category B mines will mean that JSW Steel could augment its capacity utilization from the current 80% to 100%, which means a shift from 8 million tons to 10 million tons.

This article will conclude in Part Three.

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