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JSW Steel Ltd.
Iron Ore Crunch Starting to
Bite
JSW has announced that it has curtailed capacity
utilization at its Vijaynagar Plant to 30%... The
reason is iron ore sourcing issues. We had feared that
JSW Steel was carrying production risk on this count,
but the extent of the production cut is sharper than we
expected. We are checking if this 30% figure is
sustainable and shall take a call on revising our
forecasts accordingly.
…because none of the alternatives for iron ore
sourcing in Karnataka has worked so far: Hence it
has been forced to curb the capacity utilization of its
Vijaynagar plant (~90% of its capacity) to 30%. In its
press release it has stated that “(a) NMDC has not been
able to supply 1 mt /month as allowed by the SC on 5th
August, 2011. (b) Auction of 25 mt ore stockpiles at the
run rate of 1.5 mt per month is running at a slow pace. In
three weeks post the SC order only 0.4 mt has been
auctioned. (c) In auction the prices have been
prohibitively high due to which 31% of the offered
material did not find buyers. (d) Even out of the balance
69%, only 10% has been dispatched so far due to
operational/logistics issues.”
JSW may try to distribute the available ore amongst
its three larger furnaces to keep them in hot state: If
blast furnaces move into cold state, they take more than
3-4 months to restart. Also, if the iron ore situation in
Karnataka does not improve in the next 1-2 weeks, we
think JSW may look to take down its Corex furnaces
(total capacity 1.6 mtpa) for capital repairs ahead of
earlier schedule.
We currently assume 7.4 mt crude steel output for
F12, about 10-12% lower than company guidance:
However, if this 30% capacity utilization figure persists for
some time, there may be some downside. Ironically, if
indeed JSW Steel runs at 30%, India's steel output would
fall by ~7% on a daily basis – aiding domestic steel prices.
INR depreciation is the other factor holding up India's
steel prices well, despite muted demand growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JSW Steel Ltd.
Iron Ore Crunch Starting to
Bite
JSW has announced that it has curtailed capacity
utilization at its Vijaynagar Plant to 30%... The
reason is iron ore sourcing issues. We had feared that
JSW Steel was carrying production risk on this count,
but the extent of the production cut is sharper than we
expected. We are checking if this 30% figure is
sustainable and shall take a call on revising our
forecasts accordingly.
…because none of the alternatives for iron ore
sourcing in Karnataka has worked so far: Hence it
has been forced to curb the capacity utilization of its
Vijaynagar plant (~90% of its capacity) to 30%. In its
press release it has stated that “(a) NMDC has not been
able to supply 1 mt /month as allowed by the SC on 5th
August, 2011. (b) Auction of 25 mt ore stockpiles at the
run rate of 1.5 mt per month is running at a slow pace. In
three weeks post the SC order only 0.4 mt has been
auctioned. (c) In auction the prices have been
prohibitively high due to which 31% of the offered
material did not find buyers. (d) Even out of the balance
69%, only 10% has been dispatched so far due to
operational/logistics issues.”
JSW may try to distribute the available ore amongst
its three larger furnaces to keep them in hot state: If
blast furnaces move into cold state, they take more than
3-4 months to restart. Also, if the iron ore situation in
Karnataka does not improve in the next 1-2 weeks, we
think JSW may look to take down its Corex furnaces
(total capacity 1.6 mtpa) for capital repairs ahead of
earlier schedule.
We currently assume 7.4 mt crude steel output for
F12, about 10-12% lower than company guidance:
However, if this 30% capacity utilization figure persists for
some time, there may be some downside. Ironically, if
indeed JSW Steel runs at 30%, India's steel output would
fall by ~7% on a daily basis – aiding domestic steel prices.
INR depreciation is the other factor holding up India's
steel prices well, despite muted demand growth.
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