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JSW Steel will be importing six million tonnes (mt) of iron ore in the current financial year from Canada and South Africa, to tide over the raw material shortage at its three plants. Its steel making capacity is 14.3 million tonnes a year at Vijayanagar in Karnataka, Dolvi in Maharashtra and Salem in Tamil Nadu, and needs 30 million tonnes annually of ore to maintain the current rate of capacity utilisation.
Unlike in the past, the company has opted to import ore in a capesize vessel (the largest cargo ship) and its first shipment of 170,000 tonnes of high-grade ore arrived from South Africa at Krishnapatnam earlier this week. Three more shipments in capesize vessels are estimated to reach in a few days, an official said.
“These imports are necessary to supplement the supplies in the domestic market. There is a substantial drop in domestic production and restrictions on the movement of ore from one state to another. It is an irony that mills have to import ore in spite of large resources in the country,” said Seshagiri Rao, joint managing director and group chief financial officer.
JSW Steel is operating at 85 per cent of its capacity. It aims to maintain capacity utilisation and increase it further. It intends to import 500,000 tonnes every month, he said.
The company is getting the ore at $90-96 a tonne from the foreign market. The landed cost of ore at its Vijayanagar plant in Bellary district is Rs 5,500-6,000 a tonne, slightly higher than the local material, he said.
The ore purchased in spot auctions in Karnataka is Rs 4,500 per tonne at the point of loading at the plant. The imported ore is Rs 900-1,000 per tonne at that point.
“The imported ore is expensive. But nobody gives discount on their ore in Karnataka, which contains high amount of alumina and silica. The imported ore is of very high grade (64-65 per cent of iron content),” Rao said.
The recent closure of mines in Odisha and delay in opening of mines in Karnataka and Goa had resulted in an acute shortage of ore in India. The company has decided to import half a million tonne of high-grade ore every month to maintain the capacity utilisation at optimum level, he said.
“Surging local ore prices are a concern when international prices dropped 30 per cent in 12 months,” Rao said.
There has been a decline to 77 per cent capacity utilisation in the Indian steel sector in 2013-14 from 88 per cent in 2010-11.
Iron ore production in India fell significantly during the last few years from 218 million tonnes (mt) in 2009-10 to 136 mt in 2013-14. It is expected to drop to 100 mt in 2014-15 against the demand of 140 mt.
A majority of mines in key ore producers Karnataka and Goa are yet to resume normal operations despite a partial lifting of court-ordered mining bans. The export of ore pellets has further drained mineral wealth accentuating the shortage of ore, Rao added.
JSW is getting the next shipment of iron ore at Krishnapatnam port on July 18 with similar size of cargo.
