Indian iron-ore miners rush to steelmaking sector

14th July 2015 By: Ajoy K Das - Creamer Media Correspondent

KOLKATA ( – India’s standalone miners have been galvanized to take a slice of the domestic steelmaking pie.

All large government-owned and managed miners with large iron-ore portfolios have been in touch with their respective controlling authorities seeking to spread their strategic investments into steel production, an official in the Ministry of Steel said.

Every iron-ore, manganese and chrome ore miner was scouting for opportunities to invest in large steel mills, based on the perception that the current downturn in global commodity prices could be prolonged, making it an opportune time for capital investments in downstream production and to hedge against margin erosion from just raw material production, he added.

NMDC Limited, the largest domestic iron-ore miner and under administrative control of the Steel Ministry, has sought government approval to participate in the planned special purpose vehicles (SPVs) for construction of mega steel plants across India’s mineral-rich provinces.

The Steel Ministry has already announced the creation of SPVs in Jharkhand, Chhattisgarh, Odisha and Karnataka to put up steel mills that each have a capacity of about 10-million tonnes a year with an investment of $7-billion to $8-billion riding on each.

NMDC was keen to participate in the SPVs along with the largest steel producer, Steel Authority of India Limited (SAIL). The miner was already implementing a three-million-tonne-a-year steel project at Nagarnar, Chhattisgarh, which was at an advanced stage of completion.

Similarly, Odisha Mining Corporation (OMC), a mining entity owned and managed by the provincial government of Odisha, had pitched to be part of the SPV for construction of the proposed mega steel plant in the province and had sought a majority equity holding of 51% in the joint venture (JV) with steel producers Rashtriya Ispat Nigam Limited (RINL) and NMDC Limited.

OMC has mining concessions across Odisha with substantial reserves under its control for production of iron-ore, chrome and manganese.

According to an Odisha government official, OMC had also floated the idea of entering into an agreement for floating an SPV with South Korean steel major, Posco, which, in turn, would have an exclusive arrangement for supply of iron-ore from OMC’s mines to Posco’s steel project.

Posco’s 12-million-tonne-a-year steel project at the eastern Indian port town of Paradip, in Odisha, had been hanging fire for over a decade as the company failed to secure raw material linkages for the proposed steel mill.

Not to miss out on the steel production action, even the struggling KIOCL (formerly Kudremukh Iron Ore Company Limited) has joined the race to participate in the SPV planned for a steel project in Karnataka.

KIOCL was primarily an iron-ore pelletization company now and, as it was no longer largely a mining company, without any captive iron-ore mines it was severely hamstrung in expanding its mining operations. Significantly, the Steel Ministry was currently exploring options for a merger of KIOCL and NMDC with the latter one of the other contenders for the Karnataka steel project.

The Steel Ministry was also looking at Manganese Ore India Limited (MOIL) exploring the possibilities of merging with a steel major to evolve into an integrated steel producer, though details of this were not readily available.

However, MOIL, controlling 48% of mineable manganese reserves, had announced construction of a ferroalloy production plant through a three-way JV with SAIL and RINL.