JSW to source iron ore from Goa

Faced with acute shortage of iron ore, JSW Steel Ltd (JSW) has approached six small mining companies in Goa to procure enough to feed its existing steel plant and the proposed pig iron project in the state.

“Last week JSW approached us to source iron ore for its Karnataka plant. We will discuss the terms and conditions soon to commence supply,” said Haresh Melwani, CEO, H L Nathurmal & Co, a Goa-based iron ore miner and exporter.

An email to JSW last week elicited no response. “As a company policy, we would not like to comment on such matters,” said a company official.

The company's plant at Vijaynagar (Bellary) in Karnataka currently produces 0.7 million tonnes (mt) of steel, which is set to expand to 10 Mt by the end of this month. The capacity would be further expanded to 12 mt. In the last quarter of the financial year 2010-11, the company had already started operation of its sinter plant — two blocks of the four blocks of coke oven, converter, caster and captive power plant (300 Mw) as part of 0.32 Mt expansion plan.

For the existing capacity of 10 Mt, the company requires 20 mt of iron ore to operate to its full capacity. Of this, 25 per cent or 5 million tonnes is supplied through JSW’s captive mines in the state.

Industry sources believe that JSW has signed a long-term contract with public sector NMDC Ltd to meet another 20-25 per cent of the total iron ore requirement. For the remaining 10 mt, the company is dependent on the open market.

Since, the government has introduced a revised mining policy favouring allocation of mines only to actual users, independent miners have halted excavation of iron ore. As a consequence, many sponge iron and pig iron units with no iron-ore backing have shut down.

There is a huge scarcity of iron ore in Karnataka as the state is passing through a transition phase now, said K Rathnakar Hedge, group advisor of Varun Industries, a company which has applied for a mining lease to support its proposed 5 Mt pig iron unit in the state.

Apparently, JSW does not want its operation to be hit because of the shortage of iron ore and hence, is ready to transport even through road from Goa despite huge transportation cost.

Experts believe, transporting big quantity of iron ore from Goa through roads will hit the company’s profit margin in the long run.

JSW produced 6.427 mt of crude steel in the financial year ended March 2011 as compared to 5.987 mt in the previous year.