Low-grade ore may fire JSW Ispat plant

The rising iron ore prices have created demand for low quality ore that is available in Goa.

JSW Ispat is planning to meet a part of its requirement for its 3.3 million tonne per annum (mtpa) Dolvi, Maharahastra
plant with the Goa ore and is currently talking to state’s biggest private sector miner, Fomento Resources, for sourcing the ore.

There are hardly any domestic takers of the Goa ore, which sees the entire 43 mt annual production being exported, about 90% to China.

According to sources, the company is looking at beneficiating the ore first in order to use it for steel making.

“The quantity being looked at is not very high and will not suffice the plant’s requirement,” said a source.

The hot strip mill at Dolvi plant requires around 5.8 mtpa of iron ore annually, part of which comes from the state-owned miner NMDC and rest from the spot market.

“Since a large part of the ore comes from the open market, JSW Ispat is not completely insulated from price fluctuations. Of late, the price of NMDC’s ore has also shot up in the domestic market,” said an analyst with a domestic brokerage.

Recently, DNA had reported that JSW Ispat had started importing ore as the international prices had come down much below the domestic prices. It imported close to 80,000 tonne of iron ore two weeks back for the Dolvi plant.

The JSW Group, while acquiring Ispat Industries in December 2011, spoke of plans to turn around the company in a year. But with that deadline likely to be missed, the company is employing several innovative strategies to bring the balance sheet back into black.

“The quality of iron ore extracted from Goa has usually below 57% Fe (iron) content and unusable in Indian steel plants in its original form and hence JSW is planning to beneficiate it before feeding into the furnace,” the source said.

The company is now weighing cost advantage of beneficiating the ore as against using the high quality resource, he said.

“Given an opportunity, miners in Goa would like to sell to domestic buyers, but they don’t have any takers in India,” said the source, adding if JSW and Fomento talks go through, it will be the first time in several years the company will be selling to a big steel player.

JSW Ispat currently has a capacity of producing 3.3 mtpa of hot metal, part of which is turned into cold-rolled.  “It is the rise in input costs that has forced the company to stay in the red since it was acquired by JSW Steel in December last year and unless steps are taken to mitigate that, it will be difficult to report profit,” said the analyst.