JSW Steel Stands To Benefit From Mining Ban Lift

JSW Steel has been managing to meet part of its ore requirements via e-auction, and about 3 million tons of iron ore procured from other states such as Odisha and Chhattisgarh.

However, the company’s margins were affected, since the cost of iron ore procured in other states was higher compared to that available in Karnataka. So at least in the case of Karnataka-based steel companies, the court order now means procurement of iron ore at cheaper rates, and a boost in overall production capacity.

An official of another well-known mining company, Sesa Goa, which received permission to operate since its mine was in Category B, opined that the court judgment would be helpful in restarting economic activities. The company runs one mine in Karnataka with a licensed capacity of 2.29 million tons.

Overall, the court order will definitely give a boost to a failing iron ore sector.

How?

Earlier this year, MetalMiner reported that India’s iron ore situation in the new financial year did not look very encouraging, with some predicting exports to remain range-bound between 8-9 million tons.

Once a net exporter (50 percent of total ore production was exported before the court ban), India ended 2012-13 as a net importer of the ore. As per projections (before the Supreme Court judgment), the country would end up importing about 20 million tons by the end of the next fiscal year.

India’s mineral sector grew by about 2.6 percent in the April-to-February period of 2012-13 as compared to a 5.2 percent in 2011-12. Steel production had slipped to a 2.1 percent growth in the same period compared with a 10.7 percent rate in 2011-12.

One thing is certain, however. India’s steel sector is currently facing two major hurdles – low steel intake due to the slowing down of the economy, and shortage of ore.

The SC judgment has partially taken care of one of the two.

While last fiscal year India’s steel story was dismal, growing at about 3.3 percent, the fresh impetus for the Government of India to get going on infrastructure may mean the sector could re-gather at least some of its previous pace. The global steel industry body, the World Steel Association, has already forecast that India’s steel demand would grow by 5.9 percent to 75.8 million tons by the end of 2013.

Analysts hope that at least part of this growth can be achieved with Karnataka ore being pumped back into India’s steel storyline.

by Sohrab Darabshaw