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Karnataka steel mills panic as ore supply drops post SC mining order

Iron ore supplies have started drying up after an SC order halted mining activities in Bellary. Mill owners said lack of supplies would result in manufacturing coming to a close in 2-3 days.

Lalatendu Mishra | August 3, 2011 | Updated 10:44 IST

Owners of Karnataka-based steel mills have started panicking as iron ore supplies have started drying up after a Supreme Court order halted mining activities in Bellary.

Lack of supplies would result in manufacturing activities coming to a close in two-three days, said the mill owners, even as mills in nearby states feeling the impact.

Iron ore from Bellary accounts for the production of 20 million tonnes of iron and steel, and firms have urged the government to take prompt action in view of the very low inventory levels.

JSW steel cuts production at Bellary unit

"We fully support and welcome the steps initiated for curbing illegal mining and conserving the environment. However, suspension of iron ore mining and transportation in Karnataka would result in grave implications for the iron and steel industry in particular and the Indian economy in general," said the Bangalore Chambers of Commerce and Industry in a statement.

"This will lead to, among others, high inflation, manpower layoff, idling of huge investment, socio-economic unrest in the region and loss of revenue to the central and state government," it added.

As much as 16 million tonnes of iron and steel is produced in Karnataka every year, accounting for about 24 per cent of India's total iron and steel production.

Only 10% mining legal in Bellary, finds SC panel

The owners of steel mill have said that as steel making cannot be switched on and off abruptly, the stoppage of supplies would affect them severely.

"The abrupt or long-term stoppage of blast furnace and coke ovens could be disastrous. Apart from a huge financial impact, the recovery may take 8-12 months. There are also safety concerns to be addressed," it said.

The apex court has directed various central ministries, such as those of mines, environment, steel and commerce and industry, to submit an interim report indicating the iron ore requirement of the steel industry.

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Steel mill owners are seeking early relief. According to them, the suspension on iron ore mining in India would impact gross domestic product by two per cent.

"With 25 per cent of steel production being forced to shut down in Karnataka, the GDP will be negatively impacted by 0.5 per cent, which amounts to $8.5 billion (at factor cost)," the Bangalore Chamber said.

Analysts have pointed out that shortage of iron and steel would cause an escalation in the prices of automobiles, consumer durables. It would also result in an increase in the cost of construction and infrastructure projects.


Sajjan Jindal-controlled JSW Steel has come under a cloud, following the indictment by the Karnataka Lokayukta Justice (retd) Santosh Hegde in the illegal mining scam, resulting in the stock hitting a 52-week low for the second consecutive day on Tuesday.

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The stock, which has witnessed selling pressure since the report was tabled, closed on Tuesday with a loss of three per cent at Rs 674.30 on the Bombay Stock Exchange (BSE) after gaining slightly from the 52-week low of Rs 668 recorded during intraday trade. By close the stock had lost Rs 20.50.

On Monday, the stock had plunged to a 52-week low of Rs 672 against a 52-week high of Rs 1,400 on October 4, 2010. Panic among investors led to the stock plunging by 12.30 per cent in early trade on Monday.

However, some buying support helped it close with a loss of 10.26 per cent at Rs 694. By close, the stock had lost Rs 79.

The JSW Steel stock has faced bear hammering for the last three trading sessions, despite efforts to portray a rosy picture of the company. On Thursday, the stock had plunged by five per cent and on Friday it had closed 5.5 per cent down.

Courtesy: Mail Today

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