Tighter local supplies, appreciating rupee make steelmakers look abroad for iron ore.

KOLKATA: With iron ore supplies getting tighter and the gap between global and domestic prices widening, steel companies are increasingly looking at imports as a viable option. An appreciating rupee is also offering a window of opportunity for steelmakers looking to stock up on the critical raw material.

JSW Steel said it will import half a million tonnes of iron ore from Australia and South Africa to meet a gap in the supply of the material following a Supreme Court order last month, which effectively led to a ban on mining in almost half of productive iron ore mines in Odisha. The shipment is expected to arrive by the end of the month and it will be the company's highest monthly import of iron ore.

Last month, Tata Stee imported a shipload of iron ore fines from Australia for what it said to "test operational regime" in its blast furnaces as it expands capacity to 10 million tonnes in Jamshepdur and gets ready to operationalise a greenfield unit at Kalinganagar in 2015.

Steel industry experts say divergent trends between global and domestic prices are also prompting steel majors to consider what they called opportunistic imports. International ore prices are on a downtrend and are currently at $92 per tonne, their lowest since September 2012. At home, state-owned miner NMDC on Wednesday decided to raise June prices by 6% and 9% on lumps and fines, respectively.

"Prices have dropped by 20% due to a surplus situation globally since April 14, 2014 when they were at a level of $115 per tonne. However, in India, we are facing a shortage and prices are going up. Hence imports are a strong option," said Seshagiri Rao, joint managing director and group chief financial officer at JSW Steel.

Analysts said the gain in the rupee in recent weeks could be another factor encouraging companies to look abroad for the material as it reduces the cost of imports. From Rs 62 against the US dollar in March, the rupee has gone up to about Rs 59. As Kameswara Rao, executive director, (energy, utilities and mining) at PwC, said: "While global prices have softened, Indian prices have gone up. At the same time the rupee has been holding up. While we have seen some regulatory decisions like Goa mining sector opening up and fast-track approvals for mining renewals in Odisha, ramping up mine capacity will take time. This will encourage opportunistic imports of iron ore."

While it is too early to estimate import volumes this year, it is expected to be higher than in fiscal 2014, Rao said. Last year, iron ore imports totaled 4.5 lakh tonne, significantly lower than the high of 3.1 mt in 2012-13, when steel companies resorted to large imports after the Karnataka mining ban in October 2011. Export volumes have also fallen sharply from 117 mt since fiscal 2010, when India was the third largest exporter, to 20 mt last year.

Source : economictimes.indiatimes.com