JSW Ispat imports more as ore prices bite

JSW Ispat that has been reporting losses for the last few quarters due to high input costs is stepping up its iron ore imports as the domestic prices of the resource have surpassed the international prices, making overseas sourcing cheaper.

The company has ordered a full shipment of iron ore at its 3.3 million tonne plant at Dolvi in Maharashtra and the cargo is expected to reach the plant in a few days, sources said.

“The plant has had a little dependence on imported iron ore for a long time, but now is sourcing a full shipload of ore as it is lower than the domestic spot prices,” said a source.

He said the shipment is expected to carry close to 80,000 tonne of iron ore and can suffice a week for the company. The plant’s daily requirement is over 13,000 tonne of iron ore.

While it could not be confirmed whether JSW Ispat was buying a shipload for the first time, but the source said it was the first time such a big order was placed.

The company is likely to bring in more cargoes in the future, he said.

JSW Ispat, formerly Ispat Industries, was acquired by December 2010 by the JSW group, raising hopes on a turnaround of the debt-laden steel maker. Almost a year later, however, JSW Ispat’s balance sheet is still in the red. 

Analysts say the company will take some time to report profit as the coking coal and iron ore prices had a heavy bearing
on it.

For the quarter ended September 2011, JSW Ispat posted a net loss of Rs345 crore on revenues of Rs2,735 crore, mainly on account of high raw material costs and rupee depreciation.

“In the last few weeks, while international iron ore prices have come down by around $60 per tonne, domestic spot prices have increased by `600 per tonne for NMDC, India’s biggest miner of the ore, and even higher for other miners,” said a prominent importer of steel.

While the cost at which the JSW Ispat was sourcing ore could not be known, industry experts say the current domestic price is either at par or a little higher than international price because of freight cost.

Currently, the company has minimal backward integration and purchases iron ore partly through quarterly contracts and partly on a spot basis.

B L Agarwal, president of Sponge Iron Association of India, said not only bigger steel players but smaller companies too have started importing iron ore and pellets due to a lower price overseas.