JSW Steel buys iron ore at 25-30% premium to market price

Sajjan Jindal’s JSW Steel which is grappling with issue of lack of iron ore due to the mining ban in Karnataka has procured 1.17 lakh tonnes of the feedstock at 25-30% higher prices in e-auction directed by the Supreme Court. Sources said this amount will be sufficient for them for the next 3 days.

JSW Steel is buying about 15000 tonnes of iron ore per day from NMDC and is trying to meet the rest of the requirement from the states of Jharkhand and Orissa. Procuring raw material from other states increase the cost for the company by Rs 1500 per tonne. JSW Steel requires about 50,000 tn of mixed grade iron ore for full production per day.

Company sources said that JSW Steel is presently operating at 60-70% of their total capacity of 11 million tonnes of steel production. This is due to the lack of the key raw material, iron ore in the region. Earlier, the company had announced that despite the raw material crunch they will operate at 80% capacity.

Analysts say iron ore accounts for 20% of the total cost of production for steel and the higher prices paid by the company is expected to negatively impact the performance for this quarter. As directed by the Supreme Court, the e-auction of iron ore will take place every Wednesday in Karnataka, about 5 lakh tonnes will be up for sale and buyers including JSW Steel will bid for iron ore to fulfill their requirements. First such auction has been completed on September 14.