KIOCL, a PSU under Ministry of Steel, having 3.5 MnT pa Iron Pellet plant (for producing BF and DR grade Pellets) in Mangalore (Karnataka), is looking for overseas buyers.
E-tender for export of Pellets during October, 2013, will be held between 14:00 hrs IST on 17 October and 14:00 hrs IST on 18 October, among empanelled customers.
KIOCL, the 100% export oriented and port based unit with all the logistical advantages is keen to make one shipment in October.
Since May 2013, Rupee began to weaken against the US Dollar and declined to a record low INR 68.85 in August; only the exporters in Eastern India could benefit from such exchange rate swing.
In 2010, a 15% export duty was levied on Pellets. However, in the Union Budget 2011-12, the duty was removed w.e.f March 1, 2011 considering it as a value added product.
The table below represents the Cost of exporting 1 tonne of Pellet
| KIOCL's Total Cost of Exporting 1 tonne of Fe 63 Iron Pellet | Export | Domestic |
|---|---|---|
| Cost of 1 tonne of Fe 63 Iron ore fines from NMDC's Chhattisgarh mines | 2,610 | 2,610 |
| Royalty | 250 | 250 |
| Levy of Busy route surcharge w.e.f. 01 October to 31 March 2014 | 350 | 350 |
| From Baiadila mines to Vizag Port (552 kms) | 2,600 | 1,000 |
| From Vizag Port to Mangalore port | 400 | 400 |
| From Mangalore port to KIOCL | 50 | 50 |
| Landed cost | 6,260 | 4,660 |
| Cost of Making Pellet | ||
| Iron ore fines (Requires 1.2 tonnes fines to make 1 tonne of pellet) | 7,512 | 5,592 |
| Other costs | 1,500 | 1,500 |
| Port Charges | 50 | 50 |
| Total Cost | 9,062 | 7,142 |
| Realization* | 8,658 | 7,750 |
| Operational margins (in INR/MT)# | (-) 404 | 608 |
* Current Export price of 1 tonne of Pellet = USD 140 FoB*61.84 (INR)
* KIOCL's Domestic offers at Rs 7,750/MT for October 2013
# Depreciation and other admin costs are not included
Source: SteelMint
What can be a Decent Price Bid for the Tender?
A price bid at around USD 150/MT FoB can make exports feasible for KIOCL, to re-start with.
KIOCL's Pellet Exports on Hold since 2 Years
Source: SteelMint
A Distance Based Charge (DBC) imposed by railways over and above 150% of the normal freight on Iron ore transported through rail network increased the cost of manufacturing Pellet and its subsequent export.
KIOCL is procuring Iron ore fines from NMDC's Kirandul and Bailadila mines in the state of Chhattisgarh and transports through rail or rail-sea route, which results in very high logistics cost. Mining bans in Karnataka since July 2011, has forced KIOCL to procure the raw material from NMDC.
| Route | Distance | Freight |
|---|---|---|
| NMDC-Vizag Port | 552 km | INR 1,100/MT |
| Vizag Port-Mangalore Port | – | USD 6-7 |
Source: SteelMint
Also, KIOCL's Pellet plant is running on outsourced hematite Iron ore w.e.f July 01, 2006, after Supreme Court suspended of mining operations at KIOCL's Kudremukh Iron ore mine site on environmental grounds.
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