JSW received 1.3 million tonne more Iron ore from third e-auction

JSW Steel, which was on the verge
of shutting its flagship Vijayanagar plant, secured 1.3 million tonne of iron
ore at the third round of e-auctions which happened on Tuesday.

The fuel-strapped company has now
ensured 1.8 million tonne through three rounds of e-auctions of inventory lying
in Karnataka.

Experts said while the allotment
has happened at a higher price and will dent the company's profitability in the
short term, the ore at least gives visibility to operations till the end of
this month.

 Currently JSW running at 35% capacity
utilization and now with 1.3 mtpa, it will gradually start ramping up in the
next two days and can reach full utilization by this month-end.

In the third round of e-auction,
Nowal said the company has been allotted grades of iron ore in the range of 59%
to 63% Fe content and price with an average price of Rs 2,500 per tonne. This
is Rs 500 per tonne more than at the last e-auction.

JSW Steel has secured high grade
63% lumps at a very high premium of Rs 5,100 per tonne and lowest grade 59% at
a price of Rs 2,100 per tonne.

However, Nowal said the outlook
is still bleak for the industry as the demand from auto and real estate segment
is still lackluster and the industry is pinning its demands on the festive
season.

Bikash Bhalotia, analyst with
brokerage Pinc Research, said while Rs 5,100 per tonne for the highest grade is
very high, the quantity is not expected to exceed beyond a lakh tones. “The
rest 12 lakh tones could average at a blended price of Rs 3,500 per tonne,” he
said.

He said the landed cost for JSW
Steel from the third round of e-auction will be around Rs 5,000 per tonne which
is around Rs 3,000 per tonne less than the landed cost for Chinese players.

But compared with Indian
companies, this cost of production for the company could go up by Rs2,200 to
Rs2,400 per tonne.

Nowal said the company is still
testing the market and might go for another round of price rise as cost of
production for JSW Steel is rising with each e-auction.

In the last week of September,
steel companies in India hiked prices of all kinds of steel by Rs 1,000 to Rs 1,500
per tonne and gave an indication for another round of hike in October.

However, companies did not
increase price for their long term customers and original equipment
manufacturers, and experts say a massive hike is due for them as well.