India's JSW Steel expects iron ore supply pressure to ease in Karnataka

Indian steelmaker JSW Steel expects more iron ore to be available for steelmakers from Karnataka in the near term, deputy md, Vinod Nowal, said in Mumbai on Friday August 1.

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JSW Steel sources 11 million tpy of iron ore, out of its total 21 million tpy requirement, from Karnataka.

The availability of the steelmaking raw material following bans imposed in 2011, has been slow to pick up since they were partially lifted last year, partly due to a sluggish e-auction process through which all the material is now being sold. 

JSW Steel has submitted a proposal to increase the amount available for bidding in Karnataka’s e-auction from the current 18 million tpy, Nowal said.

“If the court agrees, we will have additional 4 million tpy of iron ore being auctioned from mines in Karnataka,” he added.

Up to 51 further iron ore mines in Karnataka could get clearance to restart production in the coming six months, while close to 26-26 million tpy of the raw material would be available in Karnataka from the next financial year, starting in April 2015.

The steelmaker is also looking to add more mines for captive use in the south-eastern state.

“We have applied for at least 15 mining leases in Karnataka of which we hope to bag some [when] the government starts [the allocation] process,” Nowal said. “But this will take at least two years,” he added. 

Other iron ore sources
JSW Steel will continue to import 6 million tpy from Canada and South Africa to meet its iron ore needs, as announced in early July, while the remaining 4-5 million tpy it requires is sourced from Orissa and Chhattisgarh.

Iron ore supplies from Orissa could be increased as more mines are expected come back online in the next six months, following the introduction of a mining ban there in May 2014, Nowal said.  

“With the clamp down by the Honourable Supreme Court in Orissa, iron ore availability domestically remains constrained, causing pressure on pricing and margins,” chairman and md Saijan Jindal said in an address to shareholders on Thursday July 31.

Despite limited iron ore availability, JSW Steel reported net profits of Rs6.56 billion ($109 million) for the first quarter of its financial year that started on April 1, 2014.

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