Jindal plans to acquire coal, iron ore mines

Jindal Steel & Power, part of India's $4 billion OP Jindal group, plans to buy coal and iron ore mines in Indonesia and Australia to secure supplies of the main steelmaking raw materials.

The company, which is in talks for a $2.3 billion iron ore and steel venture in Bolivia, expects to sign an agreement by the end of the month with the Bolivian government, Finance Director Sushil Maroo said in an interview from New Delhi.

Prices of iron ore, the main steelmaking ingredient, have almost tripled in the past five years because of demand from China, the world's biggest steel producer. Prices of coking coal have declined 13 per cent in the year that began April 1, after more than doubling in 2005.

"Securing iron ore supplies will help curtail costs," said Sanjay Makhija, vice president at Fortune Financial Services. "With the China growth story remaining intact, it's unlikely prices of iron ore will fall."

Steelmakers may keep paying record iron ore prices until 2013 because Cia. Vale do Rio Doce and rival mining companies can't meet surging demand from China, Credit Suisse group said. Iron ore prices may rise 10 per cent next year and 3.2 per cent in 2009, analysts Roger Downey and Ivan Fadel said in an April 13 report.

In August, Jindal Steel won the rights to explore half of Bolivia's El Mutun deposit, or 20 billion tonne, after three years of negotiations. El Mutun, based near Bolivia's southeastern border with Brazil and Paraguay probably holds 40 billion tonne of the steelmaking material, thrice India's recoverable reserves.

Jindal plans to set up a 1.7 million metric tonne-a-year steel plant and a 10 million tonne pellet plant in Bolivia.

"We plan to sell our products mainly to countries in Europe and America," Maroo said. The company will export almost 95 per cent of its total production, he said.

The company last month completed negotiations for natural gas supplies for its Bolivian plant.

Bolivia's natural gas reserves are the second biggest in South America after Venezuela and its 9 million inhabitants are the region's poorest, with gross national income per capita of $960, compared with Argentina's $3,580 and Brazil's $3,000, according to World Bank figures for 2004.