JSW Steel gears up for iron ore shortfall in Karnataka

27-Nov-2018

State-run mineral producer NMDC’s decision to suspend production at one of its largest iron ore mine at Donimalai in Karnataka is expected to push up iron ore prices in the e-auction conducted in the State.

The move may cripple operations of over 20 small- and medium-sized steel-making units with capacity of about 25 million tonnes per annum (mtpa). NMDC suspended iron ore mining at Donimalai following Karnataka’s decision to impose 80 per cent premium on the existing Indian Bureau of Mines (IBM) rates for the extracted ore.

JSW Steel, the largest steel producer in the State with its 18 mtpa capacity Vijayanagar plant, has made stopgap arrangements to meet the shortfall by sourcing ore from Odisha and captive mines, and through imports.

Seshagiri Rao, Joint Managing Director, JSW Steel, said the company has been sourcing part of its ore requirements for the Karnataka plant from outside the State because of uncompetitive pricing and persistent shortage.

JSW Steel needs about 20 mtpa of iron ore for its Vijayanagar plant, and depending on the pricing, it buys about 5 mtpa from NMDC’s Donimalai mine.

Captive sourcing

JSW Steel recently acquired six category ‘C’ iron ore mines in Karnataka and started producing 0.7 mtpa at two mines. Another two mines are expected to go on stream by next month, taking the captive sourcing to 2 mtpa.

The company expects to increase captive sourcing to 5 mtpa by the second quarter of next year by putting the other two mines into operation. The State Government’s decision to charge 80 per cent premium will lead to a loss of ₹1,348 per tonne and ₹944 crore per annum as NMDC mines about 7 million tonnes of iron ore per annum from Donimalai.

NMDC’s mining lease, which expired this month, was renewed till November 2038, on the payment of 80 per cent of the average sale value as published by the IBM.

NMDC has said such an imposition of premium is not in accordance with the Mines and Minerals (Development and Regulation) Act and “is also not economically viable”.

Source: THE HINDU BUSINESSLINE