Two people familiar with the matter said that JSW Steel Ltd is facing its first annual drop in output in at least 10 years because of a shortage of iron ore at its biggest mill.
The people said that production at the Vijayanagar plant in southern Karnataka state may be lower than the 7.43 million metric tonne made in the year ended March 31st. The Mumbai-based steelmaker, in which Japan's JFE Holdings Inc holds a 15% stake, targeted 8.5 million tonne this fiscal year.
Dwindling output at the 10 million tonne capacity plant will impede earnings and JSW's share of India's steel market, which is forecast to grow 5.5% this year, more than double the global pace. JSW, which relies on sales of automotive steel and galvanized sheets used in construction is failing to exploit demand for vehicles, homes, roads, ports and bridges in an economy that grew 5.3% in the quarter ended September 30th.
JSW rallied 51% this year, outperforming the benchmark Sensitive Index's 26% advance, as investors bet the increase in capacity would help the company close the gap with bigger rivals TATA Steel Ltd and Steel Authority of India Ltd. The shares rose as much as 1.3% to INR 764.95 and traded at INR 763.95 as of 9:48 am local time.
Mr Giriraj Daga an analyst at Nirmal Bang Equities Pvt in Mumbai said that "The company has so far performed better than expected given the problems of raw material supplies. The company has managed to somehow secure iron ore and may continue to do so in the future."
