JSW Steel is firming up plans to bid for low grade Goa iron ore as soon as the stock comes up for bidding. Sources said that the company is currently working out a plan whether to use the iron ore for its Vijayanagar plant in Karnataka or its Dolvi plant in Maharashtra.
JSW Steel Ltd, which is the countrys biggest private sector steel producer is also the least backward integrated that is, it does not have access to any iron ore for steel production. It has three upstream (crude steel production) plants in the country with the flagship of 10 million tonnes per annum (mtpa) located in Vijayanagar, Karnataka. The other two plants are Dolvi in Maharashtra with a capacity of 3.3 mtpa and Salem in Tamil Nadu with a capacity of 1 mtpa.
With a total capacity of 14.3 mtpa, the company has an annual overall iron ore requirement of close to 22 mtpa of iron ore. But since the time mining ban was imposed in Karnataka, JSW Steel has been reeling under severe paucity of iron ore with the Vijayanagar capacity utilisation coming down to 40% in FY12. Currently, the plant is running at 80% capacity.
The company is desperate to ramp up the capacity to 100% but that does not mean at the expense of increasing costs. It is currently studying the viability of the Goan iron ore and whichever plant Dolvi or Vijayanagar looks beneficial, it will be brought there, sources said.
Analysts say, since the iron ore in Goa has primarily an fe content of 54%, it cannot be used in its original composition as most Indian plants have blast furnaces compatible with an Fe grade of 62%. They have to be beneficiated before being fed to the furnace.
But for JSW, another problem is of transportation of the Goa iron ore. Vijayanagar plant is a land-locked steel mill and hence involves a extra freight cost to transport ore to the factory gates. But on the other hand it has an in-house beneficiation facility as well, sources said.
Sources also added that the companys Dolvi plant (situated near Panvel in Mumbai) has proximity to port and would involve lesser transportation cost but lacks a beneficiation facility. While the company is keen to bid for a lions share of the ore, these are the issues which has to be ironed out, sources said.