Will JSW Steel Import 6 MnT Iron Ore in FY15?

• JSW Steel to import 6 MnT in FY15 – Press Release
• JSW’s Iron ore movement from Odisha have fallen by 30% in Q1 FY15
• Company bought around 22-23 MnT Iron ore in FY14

JSW Steel, India’s largest private steel manufacturer, in a press release has mentioned that the company is planning to import 6 MnT Iron ore owing to short supply in domestic market. Recently, the company has shipped 3 cape-size vessels to Krishnapatnam port and 1 panamax vessel to Mangalore port from South Africa & Australia.

Will JSW Steel import 6 MnT Iron ore in FY15 on Shortage of Iron Ore?

First question arises, will JSW import 6 MnT Iron ore in FY15 and the second, is there actually shortage of Iron ore in Indian market?

Answer to first question is, it is expected that provided global Iron ore prices stay at these levels and Indian currency support them. Any of these two factors moving the other way, likely to restrict imports to Indian market.

For second, there is certainly a shortfall and restricted supply of Iron ore in domestic market but not enough, which will force JSW to import 6 MnT in FY15.

The company may go for large imports not only because of ‘acute shortage’ in domestic market but also owing to lower global prices.

In FY14, the company had procured about 22-23 MnT Iron ore, out of which 17.7 MnT was from Karnataka’s e-auction, 1.5-2.0 MnT was from NMDC (Chhattisgarh), 2.5-3.0 MnT from private miners in Odisha/Jharkhand and about 0.3 MnT Iron Pellets from KIOCL. Company’s installed crude steel capacity is 14.3 MnT, which operated at 85% in FY14. The company aims to increase its utilization to over 90% in FY15.

Even if  mining situation in Odisha continues to stay for some more time, we can expect that company’s Iron ore sourcing from the state may fall to 50% (i.e. 1.5 MnT). But on the other hand, we expect Iron ore production to improve in Karnataka, which will compensate losses made from Odisha.

In similar lines, NMDC is expected to increase its production from Chhattisgarh. This will further help steel companies to overcome short supply of Iron ore in the market.

Indian Iron Ore Imports in FY15

*Indicative Price
** Vessel expected at port
# Vessel at anchorage
CNF prices in USD/MT; Provisional Data
Source: SteelMint Research

[su_quote]Mr. Seshagiri Rao, MD of JSW Steel and Group CFO said, “The recent closure of mines in Odisha and delay in opening up of mines in Karnataka & Goa had resulted in acute shortage of Iron ore in the country. We have decided to import half a million tonne of high-grade ore every month to maintain the capacity utilization at optimum level. The surging Iron ore prices owing to shortage in Indian market is matter of grave concern when international Iron ore prices have fallen by more than 30% in the last 12 months.”[/su_quote]

There has been a sharp decline to 77% in capacity utilization in Indian steel industry to shortage of Iron ore in FY14 from 88% in FY11.

Iron ore production in India fell significantly during the course of past few years i.e. from a level of 218 MnT in FY10 to only 144 MnT in FY14, which is further expected to drop to 100 MnT in FY15 against the demand of 140 MnT.

A majority of mines in two key Iron ore producing states namely Karnataka & Goa, are yet to resume normal operations despite a partial lifting of Court’s order for mining ban.

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