JSW Steel Production Improves In April 2012

JSW Steel, one of the largest steel producing companies in India, has released its production numbers for the month of April 2012. The company has shown strong recovery despite the ongoing iron ore ban in Karnataka. The production for April has jumped by 35 per cent YoY and 8.3 per cent QoQ to 0.71 million tonnes. The plant’s capacity utilisation has reached 80 per cent as against 75 per cent in March 2012. The company has consistently achieved the highest utilisation levels YTD except in the month of February 2012 on account of logistic issues and inferior quality and inadequate availability of iron ore through e-auction. Meanwhile, the company has done especially well over the last two last two months on the back of the timely availability of iron ore supply.

This shows that iron ore shortages have eased out a lot as compared to the previous year when it had to reduce its production to 30 per cent of the capacity in September 2011. The Supreme Court’s order of allowing steel companies to take iron ore from the state inventory helped ease out a lot of problems but the iron ore stocks are now at the verge of being over and steel companies are hoping for further relief from the Supreme Court to allow mining in some of the A category mines as recommended by the central empowered committee’s report.

The availability of iron ore was the only constraint for the company that restricted its crude steel production at higher capacity utilisation. However, with the smooth flow of iron ore from the allocated stock piles, JSW Steel, to a certain extent, managed to overcome these issues in the immediate term. The company management has stated that resumption of mining in the A category mines will provide some relief. The Supreme Court has, in the meantime, laid down a procedure to get the required approval for mining in the A category mines and has appointed authorities for preparing reclamation and rehabilitation (R&R) plans which will take three to four months before mining operations can begin again.