Steel Authority Of India Sets Sights On Mongolia

Not surprisingly, Indian steelmakers are looking towards mineral-rich Mongolia to get in on the action of the huge mineral wealth in that country.

According to an Economic Times report, the state-owned Steel Authority of India Ltd. (SAIL.NS) is considering replicating its successful public-private approach in both Mongolia and Afghanistan.

SAIL has signed a Memorandum of Understanding (MoU) with the Ministry of Mineral Resource & Energy (MMRE) of the Government of Mongolia in Ulaanbaatar, for exploring business opportunities in the mining and steel sectors there.

Speaking on the occasion, SAIL Chairman C.S. Verma said that the company is happy to be a partner in Mongolia’s economic development, and commended the Mongolian government for its initiatives in developing their mining sector, which shall serve to be “crucial drivers of FDI” for the country, while also meeting the mineral needs of India and other Asian economies.

MMRE Vice-Minister Garamajav termed the MoU as a welcome step in cooperation between the two countries and hoped that joint feasibility report could help Mongolia set up a mineral processing industry.

As per the MoU, MMRE will provide information on iron ore and coal deposits in Mongolia to SAIL and will offer options of locations and size of steel manufacturing facilities for the pre-feasibility study.

A joint pre-feasibility study for setting up mineral processing facilities for iron ore and coal, both coking and thermal, in Mongolia, and downstream steelmaking facilities for domestic consumption and trade, will be taken up by MMRE and SAIL, the statement said.

SAIL, on the other hand, will select the best available technology to treat Mongolian iron ore and coal deposits based on the feasibility study. The MoU envisions an exploration of investment opportunities for SAIL, either individually or in a consortium with other entities to develop mineral processing/steel manufacturing facilities in Mongolia.

In November 2011, a high-level delegation from Mongolia had visited SAIL’s Bhilai Steel Plant and held discussions with officials from SAIL and the Indian government’s Ministry of Steel.

Analysts say that SAIL’s move will reduce India’s dependence on expensive Australian coking coal, which has pushed up steel production costs to very high levels.

India imports coal from Australia, Indonesia and Brazil. Until recently, Indonesia was the first choice for Indian companies to import coal, but recent Indonesian coal policy has increased the prices of coal in that country. Now Australia is the preferred trading partner for Indian companies’ coal imports.

Though Mongolia is rich in minerals such as iron ore, coking coal, copper and uranium, the mineral assets are underdeveloped and the sector faces infrastructure issues, especially relating to evacuation and transportation.

Mongolia is the second nation of its kind where SAIL plans to develop mineral resources. Recently, a consortium of Indian steel companies led by SAIL has been shortlisted by Afghanistan to develop the mineral resources in that country.

By TC Malhotra