JSW Steel, India’s 2nd largest private sector steel maker in terms of installed capacity switched to domestic iron ore market post surge in global iron ore prices in the month of Mar’16.
The steel maker has been seen sourcing iron ore from Karnataka e-auctions for its Vijaynagar & Salem Steel plants. For its Dolvi plant, it procures iron ore from Odisha merchant miners, NMDC Chhattisgarh, imported ore (fines & concentrate) from Brazil and South Korea. And sometimes it is also seen participating in Goa e-auctions.
In Mar’16, the steel maker procured 146,300 MT iron ore from NMDC Bailadila mines in Chhattisgarh and has purchased 184,800 MT iron ore from Odisha merchant miners. The steel biggy imported 317,300 MT iron ore in Mar’16. Let’s analyse the cost comparison of JSW Steel from domestic vs global market.
Landed cost comparison of JSW Steel, Dolvi
| Particular | Barbil | NMDC | Imported |
| (Odisha) | (Chhattisgarh) | ||
| Iron Ore Price- Fines | 1,650 | 1,860 | $54 |
| Currency | INR | INR | USD |
| Grade | 63% | 64% | 62% |
| Royalty, DMF, NMET | Included | 351 | |
| Condition | WMT | WMT | DMT |
| Delivery | Loaded to Wagons | Loaded to Wagons | CIF India |
| (+) Central Tax (CST) @ 2%/ Sales Tax @ 5.5% | 33 | 41 | |
| (+) Railway Freight to Load port (Domestic) | 800 | 1,100 | |
| (+) Port Handling Charges at load port | 350 | 350 | |
| (+) Vessel Freight (Coastal) | 400 | 400 | |
| (+) Custom Duty (Imported Ore) @ 2.5% | NA | NA | $1.40 |
| (+) Port Charges at Unload Port | 200 | 200 | $3.10 |
| (+) WMT to DMT (Moisture @ 4%) | 160 | 166 | |
| Delivery time to JSW Plant | 20-25 days | 15-20 days | 25-35 days |
| Total Cost | 3,593 | 4,468 | 58.5 |
| Grade Adjustment | 0 | (-80) | (+2) |
| Net Landed Cost (INR/MT) | 3,593 | 4,385 | 4,000 |
| In USD | 54.4 | 66.3 | 60.5 |
Imported price as per index
Considered 1 USD=66.1 INR
WMT-Wet metric Tonne, DMT-Dry Metric Tonne, Moisture considered at 4%
NA-Not Applicable
Source: SteelMint Research
Landed cost to JSW Steel Vijaynagar from Karnataka e-auctions:
|
Particulars |
Price (INR/MT) |
| Bid price for fines (Fe 62%) NMDC Kumaraswamy in e-auction held on 23 Mar’16 | 1,366 |
| Royalty @ 15% | 205 |
| Logistics | 560 |
| WMT @ 4% | 112 |
| Net Landed Cost | 2,243 |
Thus, it appears that post increase in fines prices (by INR 150/MT M-o-M) by NMDC the viability of iron ore sourcing for JSW Steel from NMDC may narrow down. However sourcing from Odisha looks a better option as its landed cost is least out of the three.
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