Domestic iron ore supplies may take time to ease

JSW Steel, AM/NS hold the key to iron ore supply woes

With primary steel producers still not ready with their ore for the open market, domestic iron ore supply may take a while to ease.

“We were allotted two mines (Sagasahi and Thakurani) in the Odisha auction, of which Sagasahi, being a virgin mine, will take a while to produce. We can expect it to come on board sometime in FY22 and not immediately,” Dilip Oommen, chief executive officer at Arcelor Mittal Nippon Steel (AM/NS) told Business Standard.

During the past few months, scarcity of iron ore, the key raw material used in making steel, had taken domestic steel prices through the roof. The chronic shortage was caused by non-operationalised mines mainly in Odisha. 

Domestic hot-rolled coil (HRC) prices jumped 54 per cent during July-December 2020 from the June 2020 level of Rs 36,250 a tonne on the back of higher input costs, rising demand and and cues from a 56 per cent spike in global steel prices.

Prices rose further in January 2021 to touch a record of Rs 58,000 a tonne, but resistance from end-user industries led to a roll-back, and prices are currently hovering at Rs 56,000 a tonne.

“Currently we are dispatching only from Thakurani mine which is not enough for our own requirement and we are in addition buying from outside. So there is no question of commercial selling of ore at present,” Oommen added.

The Odisha iron ore mine auctions that concluded in 2019 ahead of pandemic in 2020 saw about 2 billion tonnes of ore getting auctioned.

Of this, between Sajjan Jindal-led JSW Steel and AM/NS, about 1.6 billion tonnes have been distributed, which is much more than 50 per cent as resource. Companies are allowed to sell up to 25 per cent of their produced ore in the open market, which is over and above their captive consumption.

As per SteelMint data, production from auctioned ore stood at 9.43 million tonne during April-November FY21 as against the target of 33.91 million tonne and 49.61million tonne produced in the same period in FY20.

In the period under review, production from non-auctioned mines in Odisha stood at 47.14 million tonne as against 40.05 million tonne in April-November FY20.  (see chart)

Meanwhile, JSW Steel acquired four iron ore mines – Narayanposi, Ganua, Nuagaon and Jajang in Odisha in February, 2019 having known reserves of 1,131 million tonne. The company, however, could not provide sale quantity to the open market.

“Currently, we are producing 2 million tonne monthly and most of it is for captive purpose to Salem, Dolvi, Monnet and BRPL (Brahmani River Pellets). A portion of this is also going to open market but not sure of the quantity,” informed Dr Vinod Nowal, deputy managing director at JSW Steel.

One of the four mines acquired by the Mumbai-based steel producer, is the biggest commercial mine of close to 800 million tonne, which the company bagged as they participated in both captive as well as commercial mine auctions in Odisha, said industry experts.

Nevertheless, domestic iron ore supply is expected to improve going ahead.

“We will surely have material for sale in the open market as iron ore lumps is not something our plants need. So to that extent some amount of ore in the form of lumps will be available for sale in the open market,” informed Oomen of AM/NS.

The company uses iron ore fines to make pellets which are in turn used in the making of steel.

As per the paper presented by Ministry of Steel in Rajya Sabha early this month, production of iron ore during April-November stood at 112 million tonne as compared to 152 million tonne during corresponding period last year.

In terms of exports, India’s illegal exports by private entities stood at 10.63 million tonne in FY20 as against 7.84 million tonne in FY19, as per Ministry of Commerce and Industry data. Data on exports of iron ore during April-November of current financial year is awaited.

Iron Ore Production from Auctioned Mines

Production Apr-Nov FY21 : 9.43 million tonne 

*Target Production Apr-Nov FY21 : 33.91 million tonne

(Target: considering 80% of last 2 year's average production from auction mines)

Production Apr-Nov FY20: 49.61 million tonne 

Iron Ore Production from Non-Auctioned Mines

Production Apr-Nov FY21 : 47.14 million tonne 

Production Apr-Nov FY20 : 40.05 million tonne 

Source: SteelMint