| NEW DELHI
NEW DELHI Dec 18 India's JSW Steel Ltd
said its 10 million-tonne-per-year plant in Karnataka
state will not operate at more than 80 percent capacity in the
near future as mining restrictions have stifled the supply of
iron ore, a key feedstock.
Difficulty in sourcing iron ore has forced the company to go
slow on plans to nearly triple annual capacity to 40 million
tonnes in the next decade, which, along with ArcelorMittal SA
and Posco recently pulling out of
projects, could derail India's steel production ambitions.
"After having invested here there is no way you can plan to
get iron ore from outside of Karnataka (on a long term basis),"
Seshagiri Rao, joint managing director of India's largest
private steel producer, told Reuters on Wednesday.
"Logistically it is not possible."
Restrictions aimed at curbing illegal mining and delays in
obtaining various approvals have meant that Karnataka's iron ore
output is expected to be 18 million tonnes this fiscal year
compared with the state's requirement of 40 million tonnes.
JSW Steel, whose second biggest shareholder JFE Steel is the
world's ninth largest steel company and a unit of Japan's JFE
Holdings Inc, will have to wait for supply in Karnataka
to improve to raise the plant's capacity from 70-80 percent
currently, Rao said.
He did not say if that would affect JSW Steel's plans to
produce 9.25 million tonnes of steel this fiscal year, a
forecast that assumed a sufficient quantity of iron ore would be
available. Its other plants in Tamil Nadu and Maharashtra states
make up its 14.3 million tonne capacity.
Iron ore production in Karnataka is expected to rise to
22.18 million tonnes in the year ending March 2015, according to
a Karnataka government petition with the Supreme Court seeking
to relax an annual mining cap of 30 million tonnes.
Capacity utilisation at Indian steel mills fell to a low of
81 percent last fiscal year, making India a net steel importer
for at least the fourth straight year. The situation had been
expected to improve this year after the Supreme Court in April
conditionally lifted a mining ban in Karnataka, but very few
mines have restarted.
India produced 77.6 million tonnes of steel last fiscal
year, well below its capacity of 90 million tonnes. Asia's
third-largest economy, the world's fourth largest producer of
steel, is targeting a capacity of 142.3 million tonnes by 2017
and 300 million tonnes by 2025.
But delays in obtaining iron ore mining rights and
opposition to land acquisitions forced South Korea's Posco and
top steelmaker ArcelorMittal earlier this year to pull out of
two projects with planned capacity of 18 million tonnes in
To ensure steady supply of iron ore, JSW Steel is looking to
buy UK trader Stemcor's Indian assets that include an iron ore
mine and processing facilities in eastern Odisha state, valued
by an industry source at up to $750 million.
"We're doing due diligence but have not taken a call," Rao
said, adding that the final date for submitting bids was Jan. 6
and a deal should be in place in the first half of next year.
"We are keen of course," he added.
($1 = 61.9700 Indian rupees)