JSW Crude Steel Production Up By 15% In August 2012

JSW Steel has announced its production numbers for the month of August 2012. The production in the month of August has jumped by 15 per cent on a YoY basis to 0.763 million tonnes.  The utilization levels have also improved from 78 per cent in the month of July to 85 per cent in the month of August. This has been the highest level of production and utilization that the company has achieved in the last seven months (refer table). We believe this jump in the utilization levels is on the back of further easing in the availability of quality iron ore from NMDC and inventory pile-up in the state.

The availability of quality iron ore has remained one of the major constraints that have restricted the crude steel production of JSW Steel at higher utilisation levels in the past. Company has been procuring iron ore from NMDC and the inventory pile after the Supreme Court ordered a complete ban on mining in the Karnataka region. But due to non-availability of quality iron ore, from the inventory the company was unable to increase its utilization levels beyond 78 per cent.

Now the stock piles are also on the verge of completion and JSW Steel have no other option to procure iron ore from other sources from different states immediately to keep the utilisation levels at 80% per cent. One of the viable sources to procure raw material could be from the mines that have been asked  to resume mining by the Supreme Court on Monday.

However, we believe that even the Supreme Court announcement to allow iron ore mining would not solve the iron ore problem in the near term since the eventual start-up of the mining activities will take time from one to six months or even more as the Supreme Court has asked all the mine lessees to fulfill certain statutory requirements like getting certificates from the forest and environmental authorities, including the Indian Bureau of Mines and then a consent for operation (CFO) from the Karnataka State Pollution Control Board. Therefore the Iron ore problem may persist in the coming months.