Tata to source iron ore from OMC for Kalinganagar plant
Tata Steel is looking at multiple options to secure uninterrupted iron ore supplies while its greenfield unit in Kalinganagar is ramping up operations to reach its targeted annual capacity of three million tonnes. Recently, Tata Steel announced its hot metal production at Kalinganagar crossed the two-million-tonne mark. In the first phase, the steel company is aiming to produce three million tonnes per annum (mtpa).
Besides sourcing ore from its captive mines, Tata Steel has been buying iron ore from merchant miners. It has participated on and off in electronic auctions of iron ore done by the state-owned Odisha Mining Corporation (OMC).
Despite having captive mines in Odisha, Tata Steel has been constrained to buy ore from external sources to meet the expanding requirements of the Kalinganagar unit. Most of the iron ore raised by Tata Steel in Odisha was catering for its flagship plant in Jamshedpur.
Now, Tata Steel is examining the feasibility of clinching a long-term pact with OMC to secure iron ore supplies. On a trial basis, the steel maker has signed an agreement with OMC valid for one year.
“Initially, we will be sourcing 0.2 million tonnes of iron ore every year on long-term linkages from OMC. We have preferred to buy ore from OMC's Daitari mines in the vicinity of our Kalinganagar facility. To start with, we have an agreement for one year. We may go for an extension, depending on quality and pricing of iron ore from OMC and also logistics issues,” said a Tata Steel source.
Depending on their requirements, many steel industries in Odisha source iron ore from OMC through long-term linkages. OMC counts Jindal Steel & Power Ltd (JSPL), Essar Steel, Visa Steel, Neelachal Ispat Nigam Ltd (NINL) and Bhushan Steel Ltd as its key customers.
For Tata Steel, seeking iron ore from OMC is risky, given the high cost of the raw material. This is more so at a time when the company is positioning the unit in Kalinganagar to be able to make steel at a cost lower than the Jamshedpur plant, given the greenfield steel unit's proximity to Paradip Port.