|Chennai||Rs. 25020.00 (-0.32%)|
|Mumbai||Rs. 26110.00 (0.19%)|
|Delhi||Rs. 25850.00 (0%)|
|Kolkata||Rs. 25720.00 (-0.66%)|
|Kerala||Rs. 24850.00 (-0.6%)|
|Bangalore||Rs. 25200.00 (0%)|
|Hyderabad||Rs. 25020.00 (-0.2%)|
Low iron ore availability, coupled with high ore prices from state-run miner NMDC Ltd, has put steel producers in a spot. Companies have started cutting capacity utilisation, as ore supply is not catching up with demand.
Hospet Steels Ltd, which produces 700,000 tonnes a year, is reeling under a crisis-like scenario. The company, a joint venture between Mukand Ltd and Kalyani Steels Ltd, is operating only two of its three furnaces and may have to consider downsizing its workforce if the situation doesn’t improve in the near term.
If Hospet represents the crisis-hit small-sized plants, bigger producers are hardly insulated. JSW Steel Ltd’s capacity utilisation dropped from 80 per cent to 70 per cent in November and could fall further to 50 per cent.
|Steel companies allege:
“We are losing money. We can sustain till banks fund our losses. As of now, we have not retrenched workers but if this continues, who knows?,” said R K Goyal, managing director of Kalyani Steels.
NMDC’s current export price is $120 (Rs 6,610) a tonne, or Rs 1,360 ex-mine, whereas for domestic producers, it is Rs 2,610 a tonne. C S Verma, chairman and managing director of NMDC, also chairman of state-run steel maker Steel Authority of India Ltd (SAIL), said exports accounted for five per cent of the miner’s output.
According to steel producers, the base price for e-auction in Karnataka is the last quarter iron ore price for sale outside the state. The closing price of e-auctions is considered the base for the sale price for NMDC outside Karnataka, which is said to have increased market prices.
“NMDC prices are neither in sync with domestic iron ore prices, nor do they follow any formula based on export prices,” a spokesperson for Essar Steel Ltd said. Essar has a long-term contract with NMDC.
The unrealistic prices from NMDC might have been reflected in the muted response in the last e-auction. Of 188,000 tonnes of lump ore offered from NMDC’s Donimalai mines in Karnataka, only 28,000 tonnes were sold, while from the Kumaraswamy mines, 28,000 of the 724,000 tonnes offered found buyers. As for iron ore fines, while 44 tonnes of the 44,000 tonnes from Donimalai were sold, 100 per cent from Kumaraswamy found buyers.
“There is an acute shortage of iron ore that is causing a lot of problems. Till now, we had stocks. Fresh supply of iron ore has to come and at viable prices,” JSW Steel joint managing director and group chief financial officer Seshagiri Rao said.
The total requirement of steel makers in Karnataka is 2.5 million tonnes (mt) a month. The Supreme Court, in a bid to give some relief to the steel industry, had directed NMDC to mine one mt of iron ore per month. Goyal, however, pointed out NMDC was mining only 700,000 tonnes. While iron ore for Karnataka steel makers is routed through e-auction, for outside the southern state, long-term agreements are in place.