JSW Steel forced to cut Vijaynagar plant output by 70 per cent as iron ore supply stops

JSW Steel, a major steel producer in the country, has announced a scaling down of production at its Vijaynagar plant to 30 per cent beginning Saturday, following a Supreme Court order directing sale of iron ore produced by NMDC through e-auction.

The e-auction, the company said, has caused an abrupt disruption in raw material supplies to JSW Steel, which depended on NMDC for long-term supplies, making it difficult to run the furnaces in safe condition.

The SC ordered auction sale of iron ore produced by NMDC by a monitoring committee, irrespective of long-term supply contracts, in the wake of closure of several illegal mines in Karnataka's Bellary district.

The Supreme Court had, on 5 August, ordered supply of one million tonnes of iron ore per month to steel mills. Thereafter, on 2 September, it had ordered release of a further 1.5 million tonnes per month by e-auction of already mined material through the monitoring committee. NMDC, however, has not been able to fulfill the court's directive so far, JSW pointed out.

The e-auction has not given any relief to steel mills as 31 per cent of the total auctioned material was not bought by any of the participants in the e-auction due to improper pricing for low-grade ore. Further, out of the balance 69 per cent auctioned material, only 10 per cent was dispatched to the industry till date due to several procedural delays. When there is scarcity of iron ore to the steel industry, certain grades of iron ore in the auction was bought at a higher price due to abnormal market conditions, JSW pointed out.

Any artificial scarcity of material may result in the prices of the raw material increasing to unnatural levels. NMDC determines the price of iron ore for long-term customers in India following the finalisation of long-term prices with Japanese steel mills.