Integrated steel producer Jindal Steel & Power (JSPL) is likely to emerge as a major buyer in the merchant iron ore space, with the Odisha government recently intimating Sarda Mines of the impending expiry of the Thakurani Block-B iron mines in Keonjhar district on 13 Aug’21, as per latest SteelMint reports.
JSPL has long enjoyed a long-term supply contract with Sarda Mines and, once supplies stop, the steelmaker will have to turn to the merchant iron ore market to ensure raw material supplies.
Sarda Mines stare at expiry
The Joint Director of Mines, Joda, has instructed Sarda Mines not to exceed the pro-rata limit of production from the Thakurani Block-B iron mines before its expiry on 13 Aug’21, according to a copy of the letter accessed by SteelMint.
The miner has been requested not to cross the production limit against the quantity stipulated in the EC granted in 2004. Sarda Mines had previously been warned by the government for exceeding pro-rata production/dispatch limit. The merchant producer has been asked to restrict the dispatch of iron ore to the quantity produced in the remaining valid period of lease.
Sarda Mines recorded iron ore production of 6.2 mn t in FY’21, as per SteelMint data.
JSPL participating at SAIL iron ore auctions
In an interesting recent development, JSPL booked 40,000 t of iron ore fines (Fe 62.5%) at SAIL’s auction from the state-owned company’s Bolani mine in Odisha, as reported by SteelMint.
By way of clarification, SAIL re-started iron ore auctions from Odisha after receiving a go-ahead from the Union Ministry of Mines regarding sale of 25% of minerals on an annual basis against previous years’ production, as per MMDR Act, 1957.
Permission for sale of minerals (read iron ore) up to 50% of current year’s production is, likewise, allowed by the recently introduced Sec 8(A) 7(A) of MMDR Amendment Act, 2021, albeit against a steep ‘additional amount’ to be levied by the government.
JSPL’s iron ore sourcing in FY’21
JSPL’s iron ore production from its captive Tantra-Raikela-Bandhal iron ore mines in Odisha’s Koira mining circle was recorded at 2.5 mn t in FY’21, as per Odisha government data. Dispatches, however, stood at around 2 mn t.
As per SteelMint data on JSPL’s iron ore sourcing in FY’21, it deserves foremost mention that the steelmaker secured around 8.2 mn t of iron ore from Sarda Mines in Odisha. JSPL’s dependence on Sarda Mines till now can easily be gauged from the fact that out of the total 10 mn t of iron ore sourcing by the company in FY’21—as per SteelMint data – over 80% were supplies from Sarda Mines.
Notably, JSPL had been allowed by the Supreme Court to lift 12 mn t of iron ore from accumulated stocks at Sardas Mines’ pitheads. It can be assumed that, over and above using a share of those stocks at its steelmaking facilities, JSPL could still be left with some inventory.
SteelMint notes that JSPL’s iron ore requirements for around 12 mn t/year to sustain its steelmaking operations would require increased merchant sourcing by the steel producer.
Considering captive supplies of 3 mn t per year, and in view of the fact that sourcing of over 8 mn t per annum from Sarda Mines will henceforth stop, the primary steel producer is likely to become increasingly dependent on merchant iron ore sources for fulfilling its raw material requirements.
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