The Karnataka mining ban is likely to hit performance of metal companies this quarter. While production itself is expected to tank, raw material cost has been nibbling away what little profit they could make. Experts say that the only way out is through a price increase in the metal space.
HK Jha, managing director of Tata Metaliks joins CNBC-TV18 to discuss the prospects of his business. Below is the edited transcript of the interview. Also watch the accompanying video Q: Tata Metaliks was doing really well yesterday. Any news of a price hike or any positive development in the country?
A: I am sorry, I am unable to give you any information which would be a leading information or price-sensitive information. Q: Is there a plan or do you plan to pass on some of your raw material costs or will you be taking a bit of a hit on the margins?
A: What is happening to raw material is well-known in the market; as opposed in time the prices of iron-ore have gone up or availability has become a constraint. To that extent, there would be pressure for all manufactures on the cost-front. It should reflect on the higher price for pig-iron, generally. Q: You had this huge three million tonne integrated steel making facility in Karnataka as a commitment. Are you now getting more help from your promoter Tata Steel to execute this?
A: Before we talk anything regarding execution, we have to see that this project is subject to Government of Karnataka recommending R&O linkage to the plant. Unless that takes place, it will be very difficult for anyone, not only Tata Metaliks, to make investment. I suppose that is still in the consideration of government of Karnataka. Only after it decides to go ahead would we talk as to what will happen and how it will be funded and that sort of things. Q: What is the status of ore availability for your plant in Goa?
A: I started with that when I said that availability and the price of iron ore is something worrying. There has been intervention made by the Supreme Court and there is the CEC which is trying to figure out the unauthorized mining which is carried out in Hospet, Bellary and other areas of Karnataka. This has certainly constrained availability of iron-ore. Thereafter, Supreme Court directed MSTC to do the auctioning, and MSTC would be doing e-auctioning from today onwards. Depending upon how the prices finally settle down, we would know the availability and its impact on the manufacturing cost. Q: What is the extent of utilization? It is nil at the Goa plant and you expect some of it will start from today or tomorrow?
A: No it is not nil. The plant is operating at this movement. We have arrangement with NMDC and we are able to source iron ore from them and our plant is operating. It is not that plant is not operating, but it could certainly operate more if the availability constraint is further removed. Q: What is the extent of capacity utilization and how much do you expect it will improve after the e-auctions?
A: It is again a leading question, I am afraid I will not be able to answer this. Q: There were some reports earlier that you could be looking to sell your plant in Goa. I understand you can
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