Rising Raw Material Costs Worry Steelmakers As Mines Shut Down
Rising cost of raw materials and a shortage of iron ore continue to worry steelmakers, after a recent Supreme Court order on illegal mining activity led to the closure of several mines.
That's the word from NA Ansari, chief executive officer of Jindal Steel & Power Ltd. Most mine owners have had to pay substantial amounts of compensation after a recent apex court judgement on illegal mining activity in Odisha. This has resulted in the shutdown of a number of mines, creating a supply and demand gap that's hurting steelmakers, Ansari told BloombergQuint in an interview.
The apex court, in August, had directed that a 100 percent penalty be levied on companies which have illegally extracted iron and manganese ore in Odisha since 2000-01, newswire PTI said in a report. The penalty is applicable on the total value of illegal mining extracts by each company over the years.
“We are hoping that going forward these mines could open up and the gap between demand and supply comes down,” Ansari said.
That would lead to some stabilisation in iron ore prices even as the industry contends with higher prices of coking coal – another key raw material for steel. “If it [coking coal price] continues at this level, steelmakers should be able to manage as long as iron ore prices come down,” Ansari said when asked if he expects further pressure on input prices.
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