India: JSW Steel exports low grade iron ore lumps from Odisha for first time

JSW Steel is exporting low grade iron ore lumps from Odisha. According to sources, the company in the last 30 days has booked 2 lakh tonnes of Fe56 -57% grade Calibrated Lump Ore (CLO) for exports and may sell another 4-5 lakh tonnes over the next two months. The company owns four mines in Odisha, this material is from its Jajang mine which, as an older mine, not only produces relatively lower grade ore that steelmaker cannot easily consume but also has a huge old stocks of low grade ore.

Mines acquired through auction need to meet a Mine Development and Production Agreement (MDPA) target to avoid being penalized. JSW Steel's move, that has raised a few eyebrows, is driven by its need to dispatch a minimum amount before its annual June 26, MDPA deadline which it is confident of doing this year.

The company only found a domestic buyer for 80,000 tonnes of 2 lakh tonne of ore it auctioned recently. It has thus decided to export the remaining amount, which it is despatching to the port at Paradip. Sources say it is ironic that they are being forced to export iron ore today due to the changed scenario and market conditions today, given their past stand.

The steelmaker's attempt to meet dispatch commitments by selling low grade ore in the domestic market last year was frowned upon by the Indian Bureau of Mines which refused to factor in the 'related party' sale in its computation of the average sale price, that forms the basis of royalty and other collections. The company insists it was misunderstood. Learning from the experience however, it has decided to export directly under JSW Steel henceforth. (SteelMint data show JSW Paradip Port Terminal has in the past exported fines from Odisha and JSW Techno Projects exported pellets*.)

India's total iron ore production is estimated at 255 mnt in financial 2022-23 (FY23), up by 2 mnt compared to 253 mnt in the preceding fiscal. JSW Steel, the fifth-largest iron ore producer, has experienced an estimated 3 mnt drop in production from its Odisha mines to 22.5 mnt (it despatched even lesser), which has dragged down the total output in FY23 to 28 mnt from 31 mnt in FY22.