Few big merchant miners in Odisha have declined their Iron ore lump & fines prices, which will be beneficial for JSW Steel in term of net landed cost.
Recent price cut by Odisha based merchant miners will be beneficial for JSW Steel. Looking at net landed cost of Iron ore to JSW Steel’s Dolvi plant, Odisha seems to be the cheapest option; followed by NMDC and imported material.
Generally, it is viable for JSW (Dolvi) to source the material via sea route as compared to road. If it is sourcing Iron ore from Odisha, the nearest port would be Paradip or Dhamra Ports and from NMDC, it would be Vishakhapatnam (Vizag).
JSW Steel’s Vijaynagar steel plant will continue to source Iron ore from Karnataka’s auction amid increasing availability and lower prices.
Price Cut by Odisha Merchant Miners
Recently, few big merchant miners like Serajuddin & Indrani Patnaik have reduced their Iron ore prices on anticipation that closed mines will resume operations soon.
Serajuddin, one of the largest merchant miners in Odisha with an annual capacity of 15.5 MnT, declined its Fe 63% Iron ore fines prices by INR 200/MT and lump by INR 500/MT. Another of the largest merchant miners, Indrani Patnaik followed suit by reducing its Fe 63% fines prices by INR 300/MT and lump by INR 750/MT.
Current offers for Fe 63% fines are assessed at around INR 1,600/MT and lump (BF grade) at around INR 3,300/MT on ex-mines basis including royalty. In addition, INR 400/MT is being charged for local transportation and handling at the nearest railway siding.
Landed Cost of Iron Ore to JSW Steel’s Dolvi Plant
| Particular | Barbil (Odisha) | NMDC (Chhattisgarh) | Imported |
| Iron Ore Price- Fines | 2,000 | 1,960 | $63 |
| Currency | INR | INR | USD |
| Grade | 63% | 64% | 63% |
| (+) Royalty | Included | 415 | NA |
| Condition | WMT | WMT | DMT |
| Delivery | Loaded to Wagons | Loaded to Wagons | CIF India |
| (+) Central Tax (CST) @ 2% | 40 | 47 | NA |
| (+) Railway Freight to Load port (Domestic) | 800 | 1,100 | NA |
| (+) Port Handling Charges at load port | 350 | 350 | NA |
| (+) Vessel Freight (Coastal) | 400 | 400 | NA |
| (+) Custom Duty (Imported Ore) @ 2.5% | NA | NA | $1.60 |
| (+) Port Charges at Unload Port | 200 | 200 | $3.10 |
| (+) WMT to DMT (Moisture @ 4%) | 160 | 180 | 0 |
| Delivery time to JSW Plant | 20-25 days | 15-20 days | 25-35 days |
| Net Landed Cost | 3,950 | 4,652 | $67.7 |
| In INR (1 USD = INR 64) | 3,950 | 4,652 | 4,330 |
| In USD | $61.70 | $72.60 | $67.70 |
Imported price as per Index
WMT- Wet Metric Tonne, DMT- DRY Metric Tonne, Moisture considered at 4%
NMDC charge royalty of INR 415/MT as per IBM
NA – Not Applicable
Source: SteelMint Research
At current cost, Odisha seems to be the best option for JSW Steel. It can also be inferred that declining Iron ore prices in domestic market followed by depreciating Indian Rupee, Iron ore import to India will certainly pause.
Indian imports in FY15 were recorded at 15 MnT. Out of which, JSW alone had imported 9.1 MnT of Iron ore.
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