Rivalry between ArcelorMittal- JSW Steel may further delay Odisha Mining Auction

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By Our Correspondent

BHUBANESWAR/JODA/KOIRA: The studied rivalry, sometimes coming to fore, between India’s two major Corporate Houses ArcelorMittal- JSW Steel , may delay Odisha’s ongoing already delayed mining auction for more times.

The Nuagaon Iron Ore Block under Joda mining circle of Odisha’s Keonjhar district, which has proven Iron Ore deposit of 792 million tonnes, spread over 767 hectares is the focal point. The block was earlier held by Kamaljit Singh Ahluwalia and his brother Prashant Ahluwalia of KJS Ahluwalia Group and Kapyee Enterprises.

The Odisha Government had on December 6 again issued a fresh NIT (Notice Inviting Tender) for auction of as many as 20 mining blocks including 12 Iron Ore, 2 Manganese and 6 Iron & Manganese blocks.

Sources keeping a close watch on the top corporate battle for getting a major iron-ore block in Odisha’s mineral rich Keonjhar and Sundargarh however said, the tussle is now open , which also put Naveen Patnaik led BJD Government in the State in hurry as well as Dharmendra Pradhan led Steel Ministry.“If mining auction gets delay, it will directly hit Steel production in the Country,” said a top Odisha Government official in Bhubaneswar.

A quick look came in the first week of December this year when the Odisha government delayed a mine auction after a ArcelorMittal’s complaint that indirectly pointed the finger at JSW Steel.Industry watchers in Odisha however the competition between the two Big players will now play out more as the same auction takes off, and many more mines come on the block before the March 31, 2020 deadline.

Overall, about 300 mining leases are set to expire in March next year including 40 in Odisha. These mines are at present mostly owned by merchant miners and will now be auctioned in what will be windfall for the Government.

The auction in Odisha saw more than 50 companies participating, with the competition being intense. But when it comes to steel companies, none other than ArcelorMittal and JSW Steel will be more than keen to get their hands on iron ore reserves.

Though JSW Steel is the largest steelmaker in India, it still lags Tata Steel when it comes to margins. That is thanks to the considerable deposits of iron ore that Tata Steel has in its captive mines. These mines in Odisha and Jharkhand meet all the iron ore requirements of Tata Steel and about 30 percent of its coal needs. Iron ore and coal are used as raw materials in steel making.

JSW Steel, on the other hand, has historically depended on the market for its raw material supplies. It has had small victories in recent times, having won rights to mines in Karnataka. But these are small — with reserves of 93 million tonne and annual production of about 7.5 MT — meeting about 35 percent of its needs.The mines in Odisha, on the other hand, will have reserves of nearly 600 MT.

Having own mines makes sense especially during an economic slowdown, like the present one. And this year’s slowdown was marked by low steel prices, but high rates of iron ore and coal, a situation that harms margins even more.

Mines are like a lifeline for the bottomline. To become the market leader, mines are the only way.This is the same reason that is driving ArcelorMittal and why it hopes to close the Essar Steel acquisition by 2019-end.

Essar Steel, which has its manufacturing facility in Gujarat’s Hazira, doesn’t have a mine. But it does have access to Odisha Slurry Pipeline Infrastructure (OSPL), which supplies iron ore to Essar Steel’s pellet plant in Odisha. The pellets are then taken to Hazira to be used in Essar Steel’s plants.

While ArcelorMittal has emerged as the highest bidder for OSPL, it will want more mines under its kitty, to bring down the manufacturing cost at Essar Steel. Globally, it has a large mining operations with annual production of nearly 60 MT of iron ore and about 5 MT of coking coal.

For sure, ArcelorMittal will want to bring all that prowess on the table, as it vies for the mines. JSW Steel, on the other hand, would want to maintain an upper hand in the Indian market.

It may be noted here that soon after the Supreme Court cleared the way in the Essar Steel insolvency saga on November 15 this year, Aditya Mittal got on the phone with Parth Jindal.

Mittal is the CFO of ArcelorMittal and son of founder Lakshmi Niwas Mittal. Parth joined his father Sajjan Jindal’s JSW Group three years ago and heads the cement and paints businesses.

While ArcelorMittal is the largest steelmaker in the world, JSW Steel recently toppled Tata Steel to become the leading steel company in India.

Accepting Parth’s wishes on the takeover of Essar Steel, Aditya said that despite ArcelorMittal’s numero uno status in the world steel industry, when it comes to India, it is JSW Steel that has set the benchmark.The bonhomie between the two scions though can barely keep the wraps on the intense competition between the two leading companies.

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