Iron Ore Constraints Continue To Impact JSW Steel’s Production

JSW Steel, one of the largest steel producing companies in India, has released its production numbers for the month of May 2012. The production for the month stood at 0.724 million tonnes, up by 25 per cent on a YoY basis. The increase in production is on the back of expansion of its crude steel production capacity in FY11. However, the company is unable to increase its capacity utilisation level which stood at 80 per cent in May. This was mainly on account of the iron ore issues faced by the company in the Karnataka region.

However, if we look at the production performance in CY12, the company definitely has shown a lot of improvement in the utilisation level from 67 per cent in February to 80 per cent in April and May of 2012. Considering the mining ban in the region, the output for 2012 till date has been better than 2011 when it had to bring down the production to 40 per cent utilisation. However, post the Supreme Court’s order of allowing e-allocation of iron ore, the company has been able to improve and sustain the production at its plant.

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’s management has stated that the 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 45 mines of ‘A’ category 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.

At present the Central Empowered Committee is going through the recommendations of the Indian Council of Forestry Research and Education (ICFRE) to finalize the reclamation and rehabilitation plan for various iron ore mines classified under the ‘A’ and ‘B’ categories. The company in a statement given to the media has said that it is hoping to achieve 100 per cent capacity utilisation in the next two to three months once the Central Empowered Committee (CEC) approves the commencement of iron ore mining in the state.