Jindal heads West to feed Orissa project

Jindal Stainless (JSL), the country's largest stainless steel manufacturer, is close to acquiring chrome ore and manganese mines in West Asia to cater to its project in Orissa.

The move comes in the backdrop of the Orissa government's failure in allocating mines for the Ratan Jindal-controlled company's ferro chrome project, for which the memorandum of understanding (MoU) was signed five years ago.

Arvind Parakh, director (business development and strategy), Jindal Stainless, said that the company was in the process of acquiring two mines, which should be finalised over the next two-three months.

He said the the company would have a significant cost advantage after the acquisition as the steel maker is currently procuring the raw material from the state government-controlled Orissa Mining Corporation (OMC) at market rates.

"The MoU for the ferro chrome project was signed around five years back and captive mine allocation was part of the agreement. However, after failing to allocate mines, the state government chalked out an alternative strategy of linkages from OMC at market rates," Parekh said.

The output from the assets would cater to the company's 1,50,000-tonne per annum ferro chrome and ferro alloys project in Orissa. "We have already committed Rs 7,000-8,000 crore in the first and second phases of the project but are yet to get the mines," he said. Parakh said the cost of acquisition would not be much because they were not explored.

"We do not have to go through a bidding process and its privately held so it should be quick."

Jindal Stainless is looking at an outright acquisition of the mines. However, it also open to buying a 30-50 per cent stake with an offtake agreement.

Industry sources said that the captive mines would improve Jindal Stainless' margins significantly. At present, its margins stand at 18-22 per cent, which could go up to 35 per cent. Chrome ore prices have increased hugely over the past few years.

"When we finalised the project, chrome ore was at Rs 3,000 a tonne and ferro chrome at Rs 28,000-30,000 a tonne. Today, chrome ore costs Rs 30,000 a tonne while ferro chrome is priced at Rs 85,000-90,000 a tonne," said Parakh.

Jindal Stainless has a chrome ore mine in Orissa, which is used to feed the Vizag plant. "We have around eight to nine hectares but it is not enough for the Orissa project," said Parakh.

Mine allocation and land acquisition are the two stumbling blocks for most steel projects in the country. None of the mega steel projects, including that of Tata Steel and Posco, have been allocated mines.