One of India's largest steelmaker JSW Steel has decided to cut production by 30%. It has even said that it will shut down its steel manufacturing across the region.
Apparently more than 70 sponge iron units in Bellary have shut shop already. This has rendered 2,00,000 people jobless, according to a news report by Economic Times.
This decision of JSW will further impact on companies related to the auto and construction industry.
The Supreme Court of India has ordered a suspension of iron ore mining in Karnataka in July 2011 based on the submission of the court-appointed panel on illegal mining in the region.
Sajjan Jindal, JSW vice chairman was quoted by a leading channel that there is no iron ore and that is available is too high. He opined, 'The suspension (of mining) should have been done separately and in a phased manner. Bringing all mining districts under the ban has led to this acute shortage.'
To deal with the crunch, the Karnataka government auctioned seized iron ore that was at 25 million, but rather than relief it shot up the iron ore prices for the steel mills.
Nearly 200,000 or more people depend on these industry directly and indirectly. During the first round of auction on September 14, prices of low grade was Rs 2,700 a tonne compared to Rs 1,200 in the open market.
Higher grade ore, used widely by the sponge iron industry, have been priced at Rs 3,700 a tonne. The high prices led to the entire lot of 104,000 tonnes of low grade iron ore to remain unsold as there were no takers.