JSW Steel Delays Commissioning of Vijayanagar Mill; Jindal South's Alumina Refinery Faces Environmental Roadblock

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Researched by Industrial Info Resources (Sugar Land, Texas)--JSW Steel Limited (BSE:500228) (Mumbai), India's third largest steel producer and a part of OP Jindal's $8 billion group, has announced that it will delay the commissioning of new production lines at the Vijayanagar mill in Bellary because of a global slump in steel demand and volatile prices worldwide. The lines, which were expected to become operational by October 2008, would have added 3 million tons of capacity to the $1.1 billion facility's existing 4 million tons, making JSW the country's largest private steel producer. Tata Steel Limited (BSE:500470) (Jamshedpur, Jharkhand) is currently the country's largest private steel producer. Upon commissioning of the extra production lines, the facility will also be the largest steel mill in India at one location.

JSW has said it will start production at the new unit after reviewing the market situation in early December. The company intends to increase steel output after the market stabilizes with an increase in demand. The projected demand for steel in the country was 60 million tons, which has now decreased to 55 million tons, causing most steel companies to cut production. Early this month, JSW Steel slashed output by 20% to keep inventory levels low, and it also has reduced prices by about $117 per ton to compete with cheaper imports. Production has begun from a sinter plant and two blocks of coke oven batteries, which were a part of the expansion project.

The company's goal is to produce 32 million tons by 2019-20 by investing $24 billion to become the country's second largest steel producer after Steel Authority of India Limited (BSE:500113) (New Delhi). The ongoing global financial crisis is not likely to affect projects under this expansion plan.

Jindal South West (JSW) Aluminium's investment plan of $2 billion to set up a 1.4 million-ton alumina refinery and 0.25 million-ton aluminum smelter in Andhra Pradesh has hit a roadblock amid environmental concerns from the tribal inhabitants of the Vizianagaram District. The proposed site for bauxite mining falls under the tribal villages of Mushidipalli, Kiltampalem, Moola Boddavara, Cheedipalem, Chinakandepalli. Villagers have been protesting against the project on grounds that the smelting, refining and mining process will exploit the natural resources of the region. They have raised concerns that bauxite smelting is a water-intensive process that will eventually lead to scarcity for local consumption. In addition to this, more than 130 villages in a 6-mile radius fall in the vicinity of the mining site. Villagers make a living from the forests in the area.

According to JSW, the required permissions and clearances for establishing the refinery are in order. The company has no role in the mining process. Responsibility of mining activity and supplying bauxite ore to JSW lies with Andhra Pradesh Mineral Development Corporation, which will start mining operations on obtaining forest diversion clearance.

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