With 25 billion tonnes in reserves, India is among one of the world's iron ore-rich countries. Yet some of the country's steel makers may soon be forced to import iron ore, because miners at home, tempted by a persistent surge in the mineral's price in global markets, are not committing to longer-term contracts.
Jindal South West Vice Chairman and Managing Director Sajjan Jindal told Hindustan Times that he might import iron ore in two year’s time.
"As a steelmaker we require steady supply and long term agreements. With no captive mines of our own we rely on domestic miners to supply us with the ore," Jindal said. "But with spot prices at such a high, they are not very keen on getting into long term agreements," he said.
JSW, the country's third largest steel maker, currently produces 5 million tonnes of steel per annum. All of its demand for iron ore is met from domestic miners, but Jindal said the company may have to start importing in a couple of years.
"I have no problems in paying a higher price for LTAs abroad but an assured supply of ore is a must," he said.
Miners disagree, however.
"It is all about timing. Five years back, spot prices were so low that Jindal did not want to get into long term agreements. Now when spot prices are high it is logical for us to demand a better price," said MSPL Executive Director Rahul N Baldota. "I am sure there are miners, who are willing to get into LTAs with him if he is willing to pay the existing price," said Baldota, who is also the chairman of Federation of Indian Mineral Industries.
JSW is not alone in looking to import iron ore from overseas. While Tata Steel Ltd. and Steel Authority of India Ltd— the top two steel makers—have captive ore and coal reserves, others like Essar Steel and Ispat Ltd are dependent on merchant miners. A senior executive at Ispat, who didn’t want to be named, said his company may also explore long-term contracts with overseas suppliers of iron ore. Spot prices of iron ore are currently trading between Rs 4000 per tonne and Rs 5,000 per tonne in the domestic market.