Closure of NMDC’s Donimalai Mine Will Have Limited Impact, Says JSW Steel

18-December-2018

JSW Steel Ltd. said the possible closure of state-run National Mineral Development Corporation Ltd.’s Donimalai mine in Karnataka will have a limited impact on sourcing of iron ore.

India’s largest steelmaker tried to allay concerns of analysts visiting its Vijayanagar plant. Ratings agency ICRA had said that that the suspension of the mine could increase ore prices in the southern state, raising costs of Karnataka-based steel mills.

In November, NMDC suspended the production of iron ore from its Donimalai mine following the decision of Karnataka government to impose 80 percent premium on the iron ore sales from the mine.

JSW Steel highlighted that in the event of closure of the facility, ore production in Karnataka could be lower by 3.5 million tonne in 2018-19. This, it said, would be more than compensated by NMDC’s existing inventory and JSW Steel’s captive sourcing.

NMDC’s inventory stood at 4 million tonne and captive mines contributed additional 2 million tonne as on Nov. 18, according to Nomura. The increase in Karnataka iron ore mining limit from 30 million to 35 million tonne is also a positive, it said.

The prices of lumps and fines, key ingredients in steel-making, have risen by more than 30 percent since December 2017, according to pricing trend provided by NMDC.

JSW Steel said it will retain its second blast furnace, which it had decided to decommission, as steel demand improves in India. This could have a bearing on steelmaker’s margins which were affected by the recent fall in steel prices and rising input costs, according to a brokerage note by Nomura.

Following Are The Highlights Of Plant Visit By Analysts

• Expansion of Vijayanagar facility from 12 mt to 13 mt and Dolvi from 5 mt to 10 mt on track
• Expansion to be completed by March 2020
• To increase Vijayanagar, downstream & raw material processing facilities for a capex of Rs 100 billion
• Sufficient land availability to expand Vijayanagar capacity from 13 mt to 18 mt
• Of the six captive mines, 2 are operational and the balance to be operational by first quarter of FY20
• These mines are 20-30 km from the Vijayanagar
• Completes trial of 24 km pipe conveyor for transporting ore from the Sandur mining region

Source: BLOOMBERG QUINT