JSW steel slows down iron ore imports on cheaper availability in domestic market
JSW steel, India’s leading steelmaker, has an annual capacity of 14.3 MnT of steel production. It procures iron ore majorly from Odisha, Karnataka, Chhattisgarh, Jharkhand, Goa and imports. In Q1 FY16, JSW imported only 0.6 MnT (13%) of its the total iron ore requirement.
If we look back a few months, since Apr’15 iron ore imports by JSW dropped consistently, except in May’15. It was 0.09 MnT in Apr’15, 0.35 in May’15, 0.16 MnT in June’15, 0.16 in July’15 and almost nil in Aug’15.
Increasing availability and falling prices of domestic ore have attracted JSW Steel towards domestic sourcing. Imports could become unviable for JSW Steel since iron ore purchase cost incurred will be more profitable from domestic ore rather than imported. On top of it, devaluated INR in the current scenario is considered to be an additional factor that made domestic offers more attractive than imported.
JSW Steel Dolvi Plant Iron Ore Sourcing
JSW steel, Dolvi procures majority of the material from NMDC Chhattisgarh starting Aug’15. Since, there is not much difference between the cost incurred by NMDC Chhattisgarh and imported (NMDC’s iron ore is USD 4-5/MT inexpensive than imported), iron ore procurement from NMDC Chhattishgarh mines will be much more viable than imported.
Cost comparison of JSW Steel, Dolvi
| Particular | Barbil (Odisha) | NMDC (Chhattisgarh) | Imported |
| Iron Ore Price- Fines | 1,700 | 1,660 | $56 |
| Currency | INR | INR | USD |
| Grade | 63% | 64% | 62% |
| Royalty | Included | 285 | NA |
| Condition | WMT | WMT | DMT |
| Delivery | Loaded to Wagons | Loaded to Wagons | CIF India |
| (+) Central Tax (CST) @ 2% | 40 | 46 | NA |
| (+) Railway Freight to Load port (Domestic) | 800 | 1,100 | NA |
| (+) Port Handling Charges at load port | 350 | 350 | NA |
| (+) Vessel Frieght (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 | 160 | 0 |
| Delivery time to JSW Plant | 20-25 days | 15-20 days | 25-35 days |
| Net Landed Cost | 3,650 | 4,200 | 60.7 |
| In INR (1 USD = INR 66) | 3,650 | 4,200 | 4,010 |
| In USD | $55.3 | $63.6 | $60.7 |
Imported price as per index
WMT-Wet metric Tonne, DMT-Metric Tonne, Moisture considered at 4%
NA-Not Applicable
Source: SteelMint Research
In the above cost comparison, currently, if JSW steel procures iron ore from Odisha, the net landed cost would come around INR 3,650/MT and that from NMDC (Chhattisgarh) would come around 4,200/MT. On similar lines, the net landed cost after import would come around INR 4,010 MT for Fe 62% grade, which is costlier than iron ore available in the domestic market.
In the coming time, the resumption of suspended mines will increase iron ore production in India and more availability of iron ore at cheaper prices in the domestic market may make imports furthermore un-viable. Whether or not JSW steel will stop importing iron ore is another facet that could unfold in the coming time.
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