Why should NMDC, which is Indias largest producer of iron ore, say in its mission statement that as it grows its mining capacity it should also emerge as a quality producer of steel?
NMDC chairman N. Baijendra Kumar argues that unlike their peers in other countries, more and more Indian steel groups are inclined to acquire iron ore deposits. Captive mines for steelmakers would invariably mean shrinking of business for merchant miners. In a situation like that, merchant miner NMDC should have a major alternative outlet for its growing production of iron ore. Our building of steelmaking capacity is an insurance against any contraction in merchant ore business.
Traditionally, Tata Steel and Steel Authority of India Limited the countrys two leading producers of steel have drawn all their requirements for iron ore from their captive mines in Orissa and Jharkhand. JSW Steel, a long-standing buyer of ore from NMDC, acquired five deposits in Karnataka with estimated reserves of 110 million tonnes last year through the auction route. Once all the five mines start production and reach rated capacity, JSW, which has 18 million tonne per year crude steel capacity, with 12 million tonnes per year alone in Karnataka, hopes to get iron ore supply of 5 million tonnes per year from its own mines. The caveat, however, is that production of JSWs captive mines will be part of a court-decreed iron ore output cap of 35 million tonnes per year for Karnataka.
Kumar said: Steelmakers backward integration by acquiring mines at auctions is a major threat to the business of merchant miners, including NMDC. In support, FIMI director general RK Sharma said: Leading steel groups have the financial clout to outbid merchant miners at auctions. This was seen at auctions in Karnataka last year when a steel group paid very large premiums over reserve prices. Kumar
will not also rule out the possibility of NMDC facing serious competition at some stage from large iron ore imports at low global prices.
NMDC was early to see the threats from domestic steelmakers captive iron ore supplies and Indias potential future iron ore imports, so it built a 3 million tonne per year mill for hot-rolled coil, plate and sheet, and automotive and silicon steel, at Nagarnar in Chhattisgarh. The Nagarnar mill is no exception to projects of this scale, and bigger, suffering from time and cost escalation. Yes, we had problems in the past. But all these are behind us. We are to commission the plant at some point later this year, said Kumar.
Distinguishing features of the steel venture are a 140 km slurry pipeline, with sufficient annual capacity to transfer 15 million tonnes per year of ore from the mines, where beneficiation facilities have been created, to Nagarnar, where a 2 million tonne per year pellet plant will operate, and beyond. The pipeline will travel another 315 km to Vizag, where another pellet plant will operate.
Our objective is to make the Nagarnar operation from the point of despatch of ore to steelmaking among the most environment friendly in the industry, said Kumar. The Nagarnar plant will go on stream when the local demand for steel is to remain firm. According to the World Steel Association, Indian steel demand will be up by 5.5% in 2018, and then 6% in 2019, which should work to NMDC advantage.
Kumar is also heralding the formation of special purpose vehicles (SPVs), with support from the steel ministry and state governments, for doing the groundwork for construction of steel mills in Karnataka and Jharkhand. The SPVs, with the backing of government agencies, will be ideally placed to facilitate land acquisition, get water and electricity allocations and ensure critical iron ore linkages for building the proposed steel plants, said a company official. Once all these are in place, the joint ventures will invite strategic partners to set up steel mills.
Kumar said that company forays into steelmaking will not be a distraction from NMDCs progressive raising of iron ore mining capacity and securing of new deposits both through government dispensation and the auction route. We are targeting iron ore production capacity of 67 million tpy by 2021-22, says Kumar. The companys present capacity is 48 million tonnes per year. Expect NMDC to participate actively in auctions when bids will be invited for a good number of privately held mines in Orissa and Jharkhand whose leases will compulsorily expire in March 2020. It seems appropriate that the biggest miner seeks opportunities beyond Chhattisgarh and Karnataka in the eastern states, which are the biggest repositories of the countrys 31.32 billion tonne resources.
Since assuming charge as chairman in September 2017, Kumar has seen to it that NMDC makes the right kind of investment in satellite-based exploration for geological mapping of minerals, particularly for iron ore in various parts of the country. Exploration work will create many opportunities for NMDC to grow its mining activities.