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JSW Steel’s production scaled down to 30% of its capacity at Vijaynagar
plant
JSW Steel’s 10.3mn tonne steel plant at Vijaynagar has been compelled to scale down its
capacity utilisation at 30% on account of shortage of iron ore. The Supreme Court had
banned iron ore mining in the Bellary, Chitradurga and Tumkur districts on account of
environmental concerns during August-September 2011. However, the court had
permitted NMDC to mine in Bellary region @ 1mn tonnes per month to meet the
requirements of the steel industry. The court had also permitted liquidation of 25.0mn
tonnes of iron ore inventory in Karnataka via e-auctions. However, production ramp-up by
NMDC and inventory liquidation have still not been achieved as per targets. Hence, JSW
Steel and other steel makers in the region are currently facing shortage of iron ore.
Nevertheless, we believe this shortage is temporary; we expect iron ore supplies to resume
sooner than later. Also, we expect JSW Steel to procure higher quantities of iron ore from
other regions in case the supplies continue to remain short for an extended period.
Meanwhile, we maintain our estimates for JSW Steel and our Neutral rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JSW Steel’s production scaled down to 30% of its capacity at Vijaynagar
plant
JSW Steel’s 10.3mn tonne steel plant at Vijaynagar has been compelled to scale down its
capacity utilisation at 30% on account of shortage of iron ore. The Supreme Court had
banned iron ore mining in the Bellary, Chitradurga and Tumkur districts on account of
environmental concerns during August-September 2011. However, the court had
permitted NMDC to mine in Bellary region @ 1mn tonnes per month to meet the
requirements of the steel industry. The court had also permitted liquidation of 25.0mn
tonnes of iron ore inventory in Karnataka via e-auctions. However, production ramp-up by
NMDC and inventory liquidation have still not been achieved as per targets. Hence, JSW
Steel and other steel makers in the region are currently facing shortage of iron ore.
Nevertheless, we believe this shortage is temporary; we expect iron ore supplies to resume
sooner than later. Also, we expect JSW Steel to procure higher quantities of iron ore from
other regions in case the supplies continue to remain short for an extended period.
Meanwhile, we maintain our estimates for JSW Steel and our Neutral rating on the stock.
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