JSW Steel to diversify iron ore sourcing

Likely to also source from Goa despite higher mining cost and lower quality; also considers import option

JSW Steel, as part of its de-risking strategy, is planning to diversify the sourcing of its iron ore, including from imports.

The company, dependent on e-auctions in Karnataka and from government mining company NMDC, among other sources in Chhattisgarh and Odisha, has for the first time participated at e-auctions in Goa, though the ore here is inferior in quality.

The move is aimed at ensuring adequate supply for its steel mills, as the availability in Karnataka has not improved significantly. The steel major bought 11,400 tonnes of ore with 58.5 and 59.5 per cent iron (Fe) content recently at the Goa e-auctions and is testing the quality at its beneficiation plant at Bellary (Vijayanagar) in Karnataka. Based on the feasibility, it plans to continue sourcing the ore from Goa, two top officials of the company said.

“We are looking at Goa as an alternative source for our raw material requirements at both Vijayanagar in Karnataka and Dolvi in Maharashtra. Our sourcing will continue, depending on how we are going to blend the ore with higher grades. We are currently testing the ore quality at Vijayanagar,” said Jayant Acharya, director, commercial & marketing, JSW Steel.

JSW currently operates three steel plants with a combined capacity of 14.3 million tonnes per annum at Vijayanagar (10 mtpa), Dolvi in Maharashtra (3.3 mtpa) and Salem in Tamil Nadu (1 mtpa). It requires 18 mtpa of iron ore at Vijayanagar and 5.5 mtpa at Dolvi. The current capacity utilisation is 80-85 per cent.

“Our main thinking is to get material for Dolvi from Goa, as it offers logistical advantages like the sea route. In future, we intend to set up a beneficiation plant at either Goa or in Dolvi because the Goan ore cannot be used directly. The alumina and silica contents are very high in Goan ore,” said Vinod Nowal, deputy managing director, JSW Steel.

Procuring ore from Goa makes sense even though the base prices are higher than from the Odisha or Bailadila (Chhattisgarh) mines. The Goan ore is available at Rs 1,830-1,970 a tonne as against Rs 1,100 a tonne in Odisha. But, the freight cost is cheaper than at Odisha or Chhattisgarh and the landed cost of Goan ore at Dolvi is Rs 3,300 a tonne compared to Rs 4,700 a tonne from Odisha. So, the company would make a net gain of Rs 140 crore when it imports one million tonnes, said Ritesh Shah, senior metals analyst at Espirito Santo Securities.

As part of its raw material diversification strategy, JSW Steel is actively considering an option to import ore, to make use of the appreciating rupee and falling prices in the spot market.

The latter have seen a year-on-year decline of 19 per cent to $95 a tonne for 63/63.5 per cent Fe fines. In addition, the rupee has appreciated to 58.5 a dollar, making import cheaper.

“We are actively considering options to import ore for Dolvi. However, we are yet to take any decision on when to import and how much. We will take a decision based on how long the crisis will take to be resolved in Odisha,” said Acharya.

In the 2012-13 season, the company had imported around two mt of ore, of the total of 3.05 mt imported by the country.