JSW Steel plans tie-up with OMC for long-term iron ore linkage

Seeks to secure supplies for its 10-mn-tonne mega project on which it has committed Rs 50,000 cr

Sajjan Jindal-led JSW Steel is keen to have a long-term iron ore linkage arrangement with the state government-controlled Odisha Mining Corporation (OMC) to secure iron ore supplies for its planned 10-million tonne steel plant.
 
The company has committed an investment of Rs 50,000 crore in the steel mill and an additional Rs 3,500 crore on associated infrastructure such as coal and iron ore berths and a slurry pipeline.
 
“JSW Steel wants to secure long-term iron ore supplies for its proposed steel project in Odisha. For feeding the steel plant, it needs 16 million tonnes of iron ore annually.
 
The company has discussed this with the state government, though there is no definitive proposal yet,” said a senior government official with the industries department.
 
At present, OMC provides iron ore to many steel units running in Odisha without captive mines. The ore is offered through electronic auctions, which are normally conducted every alternate month. A steel unit or any other end-use plant can source iron ore either through pre-emption or long-term linkage.
 
Under pre-emption, the Odisha government has a policy to reserve at least 50 per cent of the ore produced by the merchant miners for state-based end-use plants.
 
In Odisha, Essar Steel, Visa Steel, Jindal Steel & Power Ltd (JSPL), Bhushan Steel Ltd, and MMTC-promoted Neelachal Ispat Nigam Ltd (NINL) are among the steel units that buy iron ore from OMC through long-term linkage. For JSW Steel, having a long-term linkage arrangement with OMC makes sense as the state-run miner was mulling a cut in the floor price of the ore offered through this route.
 
Steel and other end-use industries were already pressing for a discount of 20 per cent on iron ore they buy from OMC via long-term linkage. Even Tata Steel is examining the possibility of clinching a long-term pact with OMC to secure iron ore for its Kalinganagar plant.  R Vineel Krishna, managing director of OMC, could not be immediately contacted for comment.
 
For JSW Steel, the other workable route is getting an iron ore block through competitive bidding. JSW Steel has bid for the Kalamang iron ore block which has been opened up for auctions in Odisha. The Kalamang block, reserved for an integrated steel plant, has also got competing offers from Tata Steel Ltd, Tata Sponge Iron Ltd, Bhushan Steel Ltd, Vedanta Ltd, Rashmi Metaliks Ltd, Thakur Prasad Sao and Sons Ltd, JSPL, Shyam Metaliks & Energy Ltd, RINL, and Shri Jagannath Steels & Power Ltd. A source at JSW Steel said, “We keep evaluating different options for iron ore security. Our priority is to win a block through auctions. But, we are also open to buying ore from  OMC or merchant miners if our bid is not successful.”
 
Earlier, JSW Steel has unsuccessfully bid for the Ghorburhani-Sagasahi iron ore block in Odisha which went to Essar Steel.
 
The 10-million-tonne steel project by JSW Steel is proposed to come up in two phases — four million tonnes in the first phase and later ramped up to full capacity. The location for the steel unit is yet to be zeroed in though the company has opted for a shore-based location near the Paradeep port.

Mega investment on the cards

• JSW is planning a long-term iron ore pact with Odisha Mining Corporation for secure supplies
• The idea is to secure iron ore supplies for its planned plant of 10 million tonne capacity
• Annual iron ore requirement for the planned steel unit is 16 million tonne
• Company has also bid for the Kalamang iron ore block auctioned in Odisha