What Jindal Steel's Iron Ore Pellet Capacity Means for Industry

Jindal Steel & Power Limited (JSPL) recently said it would double its iron ore pelletizing capacity in Odisha to 9 million tons a year by end-2013, as we wrote in Part One of this article.

Right now, Jindal Steel operates a 4.5-million-ton-per-year iron ore pellet plant in the Barbil region, and said it would be installing another unit at the same site. A report by Platts quoted a senior unnamed official of the plant as saying the company was also building a 6 million mt/year integrated steelworks at Angul in Odisha, and another steelworks of a similar capacity at Patratu in the neighboring state of Jharkhand.

The company already has captive iron ore mining operations at Tensa, some 250-300 kilometers west of Barbil, but the company also gets its own ore from local miners to feed its pellet plant.

So what’s the impetus in the Indian iron ore and steel market for all this?

Avoid Exports of Iron Ore Fines

MetalMiner reported way back in August 2012 how Indian steel producers, especially those based in Odisha, were resorting to manufacturing pellet production from iron ore fines, rather than export the latter.

today's metal prices - MetalMiner IndXJindal Steel’s decision to increase its pelletizing capacity seems to stem from the lack of response for finished steel prices, like many other large steel mills that were facing similar difficulties in selling finished products. These sponge and pig iron plants sell intermediate steel goods to large steel plants that have the capacity to produce finished steel.

JSPL currently uses about 50 percent of its pellet output for steelmaking and supplies the remaining to competing steelmakers.

With high rail freight rates and export tariffs hampering exports of iron ore fines from India, Odisha has seen an increase in the availability of fines at competitive rates currently averaging about US $25 per metric ton for high-grade fines.

OMC itself has been offering 62%-Fe fines at US $28.50 per wet metric ton.

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Read more Indian perspectives from Sohrab Darabshaw.

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