Historically, JSW Steel has more reliance on open markets that meet iron ore demand, and is actively bidding for more captured mines or obtaining mines during its lease term.
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Meanwhile, Tata Steel, which currently purchases all iron ore from captive mines, is exploring at least a portion of its demand from the open market, as leases for several of its major mines expire in 2030.
Large independent miners such as NMDC Ltd and Odisha Mining Corp. Ltd (OMC) will closely monitor these strategies, which provide iron ore to the steel industry.
These strategies may also have a big impact on the government’s finance ministry, which earns considerable income by allocating royalties for mining areas. Competition in mining areas determines the price of resources in these countries at auction.
Tata Steel’s Captive Information
Tata Steel is evaluating how much iron ore it wants to encounter from captive sources.
Bid premium refers to the amount of the mining company paying the government to the government at the highest basic price. In order to obtain rights to the mine at the auction, the company bids for how much premium it is willing to pay. Under active bidding for coveted assets, bid premiums may exceed 100-150%.
Over the years, Narendran has returned to the company’s reliance on captive coal mines. “Twenty years ago, 65-70% of Tata Steel’s coal was captured. Today, only 15-16% were captured. We have made the transition to coal and we are planning the transition to iron ore so that we can minimize the impact of cost as much as possible.”
To be sure, the company will still have some captive mines after 2030. These include mines acquired through the acquisition of Neelachal Ispat Nigam, Bhushan Steel and Usha Martin. It also acquired the Gandapada Mine in Odisha through auction.
JSW Steel Bidding Big
Its co-managing director Jayant Acharya told analysts in a recent recent call that JSW Steel will bid for all new mines auctioned in Karnataka and Goa.
“There are some new mines, 10 mines to be auctioned (in Karnataka) and we will also auction these mines. Similarly, if there are more auctions in Goa, we will also consider this,” he said.
The company has met about 39% of its iron ore demand from captive mines, a figure that is expected to increase in the next few years as it can operate its recently acquired mines and acquire new ones.
The captive’s haste
“Iron ore is the most critical resource for steel manufacturers. If mines are provided at reasonable prices, steel producers would rather be 100% integrated.”
“Captain mines are strategic when empowering raw materials to safety. Steel companies don’t mind paying higher than market prices for captive iron ore to reduce their reliance on market purchases.”
Nevatia explains how JSW Steel is aggressive in the tender and points out how it “relied entirely on the iron ore market from several years ago and has been on the receiving end for the past decade due to several supply damages from the state mining ban.”
At the same time, Tata Steel may not be so aggressive in bidding, as new mines are not needed until FY 30, he said.
logistics
Another reason for the difference in strategy is with another key cost that steel manufacturers must consider – volunteers.
JSW Group has been investing in logistics assets such as San Francisco, ports and berths that reduce the logistics costs of JSW Steel. Dhruv Goel, CEO of leading market intelligence firm Bigmint, said this allows companies to actively bid for landmines because the costs will be offset by lower logistics costs.
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“Even if they pay a 100% premium, they can reduce that fee with reduced logistics costs. Meanwhile, Tata Steel’s premium is not a business case. He said that most of Tata Steel’s main assets are located in the mineral-rich belt of Odisha and Jharkhand, lowering the mineral costs to Irar Ore, he said, he said.
