JSW Steel, Dolvi has remained a prominent buyer of iron ore from NMDC (Chhattisgarh). According to railway movement data maintained with SteelMint, last month (i.e. in May’16) JSW Steel procured 32 rakes of iron ore from NMDC (C.G.).
But the steel maker did not source a single rake of iron ore from NMDC Chhattisgarh in Jun’16*.
It looks that the steel biggy has shifted its buying interest towards Odisha. It is evident from railway movement data that JSW Steel has increased its iron ore sourcing from Odisha. It raised its procurement from 62 rakes in May’16 to 79 rakes in Jun’16*.
It appears that the difference in the landed cost might be the reason behind shift in buying interest.
Presently prices of Odisha fines (Fe 63%) are in the range of INR 1,100-1,300/MT (ex-mines, including Royalty, DMF & NMET). Odisha based merchant miners are also seen offering discounts on bulk quantity purchases. JSW Steel procures material from Odisha mines via railway movement to Dhamra port siding (freight is around INR 700/MT) and then moves to Mumbai port for its Dolvi plant via coastal movement. Considering other expenses, landed cost of fines to plant may stand at INR 2,800-2,900/MT.
While NMDC’s iron ore fines (Fe 64%) prices are at INR 1,460/MT (FoR siding prices, excluding Royalty, DMF & NMET). Rail freight from NMDC (Bacheli, Chhattisgarh) to Vishakhapatnam port tippler iron ore unloading siding (VPTG) is INR 1,150/MT.
As per market sources, there is difference of around INR 600-700/MT between the two over which Odisha iron ore is being preferred by JSW Steel.
Market participants are hopeful that amid weak sponge iron prices in central India (down by upto INR 450/MT) NMDC will be under pressure to cut iron ore prices for Jul’16 deliveries.
Note: * data updated till 26 Jun’16
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