Over 60 per cent sponge iron plants in Karnataka have shut operations due to shortage of iron ore, impacting small and medium steel companies such as Kalyani Steel, Sathavahana Ispat and Kirloskar Ferrous.
According to the Karnataka Iron and Steel Manufacturers Association, more than half of the 60 sponge iron plants have shut shops and several others have suspended operations partially as the mining ban in the state has crippled mining operations and created a shortage of raw material for steel units.
In April 2013, the apex court lifted the ban on iron ore mines in Bellary, Chitradurga and Tumkur districts of Karnataka. Out of 115 mines (categories A and B) that are eligible to start operations after the Supreme Court’s verdict, only 24 mines have commenced operations so far.
R K Goyal, managing director, Kalyani Steel said, “We are in deep crisis. Our imports of finished steel have multiplied six times this year and domestic demand has gone down substantially. We have also send letters to the government and NMDC to provide us with raw material but there is no response from them.”
About half of India’s 80 million tonnes of annual steel production come from sponge iron route. The steep rise in prices of iron-ore is a major concern for the industry. According to experts, NMDC has not cut iron-ore prices in tune with decline in global prices, leaving producers’ margins under pressure.
According to experts, profitability margins of the steel-sponge iron companies operating out of Karnataka are expected to take a hit due to increased procurement costs and lower capacity utilisation due to non-availability of iron ore, which may not even cover the overhead costs fully.
Goyal further said that few plants are running with only 20 per cent capacity utilisation. A sponge iron unit in Bellary, set up with an investment of Rs 30 crore, has now been sold as scrap for around Rs 6 crore.
The industry body has met Karnataka Chief Minister Siddaramaiah and sought a captive mine for sponge iron units. The association also met a team of bankers for granting them extended working finance capital.
Source: The New Indian Express
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