NMDC suspension of mining in Donimalai to hit steel companies, including JSW Steel

NMDC suspension of mining in Donimalai to hit steel companies, including JSW Steel
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New Delhi, Nov 21: NMDC’s suspension of operations at its Donimalai iron ore mine in Karnataka will hit operations of steel companies in the state, including those of JSW Steel.
However, the Sajjan Jindal-promoted company, which is the largest steelmaker in Karnataka, has made additional arrangements to meet its requirement.
NMDC, which is the largest iron ore miner in the country, had suspended operations after the state government imposed an 80 percent premium on sales from the iron ore mine.
Such an imposition, NMDC said in a statement to BSE, is not in accordance with the MMDR Act and “is also not economically viable.”
A meeting was held on November 14 between government officials and NMDC executives, but a decision hasn’t been taken as yet.
“Pending the decision on the representation by the Karnataka government, the production has been temporarily suspended,” NMDC said in its statement.
Karnataka has nearly 20 steel-making units that produce about 25 million tonne a year. The largest is JSW Steel, whose unit in Vijayanagar manufactures 18 million tonne of steel a year.
“JSW Steel has been sourcing part of its iron ore requirements for its Karnataka plant from outside Karnataka as there is a persistent shortage of ore and uncompetitive pricing,” said Seshagiri Rao, Joint Managing Director and Group Chief Financial Officer, JSW Steel.
“The temporary suspension of mining at Donimalai plant will further increase the shortages of iron ore in Karnataka and JSW Steel has made arrangements to source more iron ore from outside Karnakata to ensure uninterrupted supply and running of steel plant,” Rao said.
While supply of the vital raw material may not be hit, the cost of procurement could certainly go up.
Sources said that JSW Steel buys 5 million tonne of iron ore a year from NMDC’s Donimalai mine. Its total iron ore requirement is around 20 million tonne a year.
JSW Steel had won rights to six iron ore mines in Karnataka earlier this year. Two of them have become operational and are producing 0.7 million tonne.
“When all 6 mines start operations, JSW Steel will get about 5.1 million tons of iron ore from these mines from the middle of the next financial year,” a source said.