India: JSW Steel withdraws mine closure plan for surrendering Jajang iron ore mine

JSW Steel, after having announced in September that it would be surrendering its unviable Jajang mine in Odisha, seems to have now changed its mind.

In a statement issued to the Bombay Stock Exchange (BSE), the steelmaker said it was withdrawing its notice for the surrender of the mining lease in Keonjhar that it had won in an auction in 2020, at a premium of 110%.

Three months ago, after the government refused to let it produce less than its mandated minimum production under its MDPA (of about 7.8 mtpa of dispatches), JSW Steel had sought approval of its mine closure plan from the Indian Bureau of Mines as a prerequisite for surrendering the mine.

"Considering the demand-supply of iron ore," said JSW's statement, referring to the strong Chinese demand for low-grade ore, it has decided to withdraw this application.

This is the second time the steelmaker has committed, and then changed its mind about surrendering one of the first mines auctioned in the country.

Global iron ore prices have strengthened by $15/tonne as per SteelMint data. SteelMint's iron ore fines export index rose to a 2.5-year high on the China price rally.

Iron ore produced from this mine is now of an average Fe54% grade and does not find captive consumption. However, despite the current iron ore prices, running Jajang (at 110%, which means 110% of its revenue goes to the state, will be a challenge and may not fetch the company any profits. Around 10 million tonnes of high grade ore of Fe58-59% out of 30 mnt is locked up in forest marked as 'sabhik' and getting regulatory approval for the same will take time. But if the current market for low-grade ore remains strong, JSW could at least meet its MDPA.

Surrendering of the mine, given that the general elections are round the corner, may not have gone down well with state government.