Tata Steel resumes iron ore purchase from NMDC to meet shortfall

7 September 2015

Tata Steel is buying iron ore from NMDC Ltd to meet supply shortfall from its own mines.

Sources confirmed that in the past couple of months, Tata Steel has bought iron ore from NMDC.

“The continuing problem of evacuation since July with the State government from its Noamundi mines in Jharkhand over the lease renewal issue made it opt for domestic purchase as NMDC price for high grade ores was lower than the landed cost of imported ores,” said a sourcein the know of the developments.

Last year, Tata Steel had bought 0.8 million tonnes iron ore from NMDC and imported around 1.5 million tonnes to meet the shortfall for the Jamshedpur plant during the four-month closure in the same mine ordered by Jharkhand government.

In the October-December quarter last year, NMDC price for high-grade ore was around Rs 4,600 a tonne, lower than the prevailing landed cost of imported iron ore.

However, because of scarcity in the domestic market, Tata Steel also imported the raw material.

Lower ore price
According to industry sources, availability of ores in the domestic market has improved this year.

After a 6 per cent reduction in April this year on eased availability and lower demand, the NMDC price for lumps (top grade ore) now stands at RS 3,050 a tonne whereas import cost varied between RS 3,250 and RS 3,400 a tonne.

Sources said lower domestic price of iron ore compared to US-dollar denominated import price prompted Tata Steel not to go in for imports.

“Apart from NMDC’s price reduction, the recent appreciation of dollar against rupee also made iron ore import dearer,” an industry analyst pointed out.

Domestic demand
According to Sushim Banerjee, Director-General, Institute for Steel Development and Growth (INSDAG), this year, domestic demand for iron ores – both lumps and lower grade fines – is likely to grow between six per cent and eight per cent.

“This year so far, the local demand is estimated to have grown by around 7 per cent. The prediction for international price for iron ore this year is to remain in the range between $52 and $58 a tonne,” he added.

The Noamundi mines supply around 50 per cent of iron ore requirement of the Tata Steel’s 9.7-million-tonne plant.

According to industry estimates, the average cost of extracting iron ore from Tata Steel’s captive mines stand around Rs 900-1,000 a tonne.