JSW Steel Reports Highest-Ever Production Numbers in 2012

India’s steel manufacturer, JSW Steel Limited, has reported the highest-ever volume of production and sales for 2011-2012, including Q4 FY2012.

According to a Business Standard report, the company produced 7.43 million metric tons of crude steel in FY12 and 2.07 million metric tons in Q4. Similarly, sales volume in FY12 and Q4 was 7.82 million tons and 2.31 million tons, respectively.

This, despite severe iron ore shortages plaguing Indian steelmakers, not to mention other roadblocks.

According to a statement issued by JSW, during the initial phase of e-auctions, the company faced severe shortages of iron ore at plants due to procedural delays, and logistical constraints in movement of the ore even after securing the ore in e-auctions. (Get the latest intelligence on steel and iron ore prices from the MetalMiner IndX.)

The company claims that if the iron ore availability were not a constraint, the company would have surpassed the initial target of crude steel production of 8.75 million tons in 2011-12. The company participated in the e-auctions and bought iron ore even though the ex-mine price for various grades of ore is kept at a relatively higher level.

The company received 75 percent of the iron ore at plant’s site as of March 31, out of 10.7 million total tons secured in e-auctions, the statement notes.

The shortage of iron ore supply has affected the company’s production. The iron ore shortage happened mainly because last year the Supreme Court of India had banned illegal mining activities in the south Indian state Karnataka.

However, even though the ban has been partially lifted since last month, the company is still facing shortages of its key raw material, iron ore.

The Court has allowed Category “A” mines, or mines spread over 50 hectares or more, in the Bellari district in southern Karnataka to restart operations after environmental clearance.

The Court had earlier granted permission to state-run National Mineral Development Corporation (NMDC) to mine up to a million tons of iron ore per month.

But according to the BS article, for JSW Steel, the resumption of category B mines will be crucial both for achieving production and sales targets as well as plant capacity utilization of over 70%.

The company says that availability of iron ore remained a bottleneck for most of FY 2011-12 due to NMDC not being able to produce and supply 1 million tons per month as directed by the Supreme Court; additionally, the quality of iron ore available in e-auctions from stockpiles deteriorated substantially, which together led to loss of production and increase in cost.

The company had given a target for FY 2011-12 crude steel production of 8.75 million tons and saleable steel sales of 9 million tons. Following the ban on iron ore mining, the company revised the target to 7.5 million tons and 7.8 million tons, respectively, for production and sales.

BY TC Malhotra