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JSW Steel to bid for low grade Goa iron ore

JSW Steel is firming up plans to bid for low grade Goa iron ore as soon as the stock comes up for bidding.

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 country?s 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 company?s 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 lion?s share of the ore, these are the issues which has to be ironed out,? sources said.

Around two years ago, JSW Steel was in talks with the biggest private miner in Goa, Fomento Resources, to source their iron ore for Goa as supplies from Karnataka had fallen drastically due to a ban on Category B and C mining in the state. However, talks didn?t progress as eventually mining in Goa, too, was banned.

?It makes sense to use the Goa ore for its Vijayanagar plant as the company is already sourcing low quality ore from far flung places such as Orissa and Chhattisgarh and then blending it with higher grades. Therefore, bringing from Goa will be more or less the same cost plus Vijaynagar will offer the advantage of a beneficiation facility,? said Goutam Chakrabothy, from brokerage Emkay Global.

JSW pays an extra cost of R800-1,000 per tonne in sourcing ore from Orissa and Chhattisgarh. Another analyst said JSW Steel does use some low quality ore after beneficiation but they are of still higher fe content than the iron ore available from Goa. ?It had been beneficiating 57-58% fe content iron ore and bring it up to 63-64%. But in case of Goa, it will have to mix it with some percentage of high quality ore to reach the desired levels permissible in its furnace,? he said.

The Supreme Court, on November 11, had allowed auctioning of already mined 11.46 mt of iron ore in Goa and had proposed setting up a panel to decide on the cap on mining of the resource from the state.

However, on the very next day, the Karnataka Iron and Steel Manufacturers? Association (KISMA) filed an affidavit in the court to restrict the iron ore to be exported and should be sold to the steel mills in the country. ?The appeal has now been withdrawn by KISMA on insistence of the Goa government,? the source said.

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First published on: 23-11-2013 at 04:59 IST
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