Acute shortages of iron ore in Karnataka and higher auction
prices have forced India's largest steelmaker JSW Steel to cut
production by around a third. More than 70 sponge iron units in Bellary have
shut shop already, leaving around 200,000 people jobless.
JSW's decision to cut output has impacted key user industries such as auto and
construction where supplies have fallen by about 40%, according to executives
from steel mills that are contracted to sell to carmakers.
While the ban has cut iron ore supplies, it has also pushed
prices higher in state-conducted auctions of the commodity. “It's a mess
now,” says JSW vice chairman Sajjan Jindal. “There's no iron ore,
prices of those that are available are too high. The suspension (of mining)
should have been done separately and in a phased manner. Bringing all mining
districts under the ban has led to this acute shortage,” he added.
During the first round of e-auctions on September 14, prices of low grade fines
was Rs 2,700 /MT compared to Rs 1,200 in the open market. Higher grade
ore, used widely by the sponge iron industry, have been priced at Rs 3,700 a
tonne. The high prices led to the entire lot of 104,000 tonnes of low grade
iron ore fines to remain unsold as there were no takers. “The high reserve
prices kept the smaller mills out,” said Karnataka Sponge Iron Association
president Sreenivasa Rao.
“Also , for a sector that makes key inputs for the user industries, we
have not been awarded any mining leases neither any land.”
The auto industry has taken a big knock in this crisis and
are staring at a drop in demand due to high interest rates.
Nitin Johari , CFO of Bhushan Steel, a major supplier
to carmakers like Honda, Tata Motors, Maruti and Hyundai, says sales to
the industry has fallen by about 15-20 %. Agrees Ankit Miglani , director at
Uttam Galva, another large supplier to car companies , says supplies to the
auto industry have fallen by about 40%.
Source: The economic Times
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