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Last Updated : Feb 04, 2015 12:50 PM IST | Source: CNBC-TV18

Will bid for upcoming iron ore auctions selectively: JSPL

Ravi Uppal, managing director, JSPL is confident of starting its international mines businesses by March. The company has mines in both Mozambique and Australia.

Jindal Steel and Power Limited reported a consolidated net loss of Rs 1,675 crore for Q3 on Tuesday. Speaking to CNBC-TV18, Ravi Uppal, managing director, JSPL says the company’s numbers were impacted by imports from China and Russia.

Another issue that weakened the company’s performance was the scarcity of iron ore due to shut mines.  The Supreme Court had ordered the closure of nearly half of the iron ore mines in top producing state Odisha due to non-renewal of years-old leases.

Uppal says the company will get iron ore supplies from the Sarda mine in the near future and adds that the inventory there amounts to 10 million tonne (MT).


Furthermore, Uppal is confident of starting its international mines businesses by March. The company has mines in both Mozambique and Australia.

“We have got a part of the Australian clearances. We are now awaiting the rest. But we expect the mine to start functioning from March. Also our mine in Mozambique was hit by some logistical issue. We see that being sorted by mid-February,” he adds.

Uppal adds that the company will bid for the upcoming auction but very selectively and will fund the bids via internal accruals.

Below is the verbatim transcript of Ravi Uppal's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: Take us through your realisations, the demand and iron ore availability.

A: First of all during the last quarter, the demand in the steel market was quite subdued both international market as well as domestic market and as a result of which there was a lot of pressure on the net sales realisation and what made things more grim in the domestic market is the tremendous amount of imports which came in from China and Russia.

There is no level playing field for Indian and Chinese manufacturers. The Chinese manufacturers are very much supported by their government. Therefore they were able to drop their prices to a level that Indian manufacturers are finding hard to match. So the net result was that the net sales realisation (NSR) went down quite a bit. This was for almost every manufacturer and the margins consequently went down by 4-5 percent.

As far as the iron ore is concerned, Q3 also had a difficult situation with regard to the iron ore supply. Since many mines in Odisha were closed by the government order, therefore the net supply in the market was low and the price of the iron ore was quite against the international trend as they went through the roof.

However, the situation has started to improve from the start of January because some of the mines have been opened and the supply situation or iron ore has improved considerably in the last two weeks and the prices have also started to soften now. So let us hope that in the weeks to come that the iron ore prices will come back to the normal level.

Sonia: Could you break up your iron ore sourcing for us, how much will you be getting from Tensa and what is your inventory at Sarda Mines Pvt Ltd (SMPL) and are you all importing any iron ore at this point?

A: Tensa mine meets up to 30 percent of our total requirement, the rest of the iron ore getting from the local market or from Odisha Mineral Corporation. We are not importing any iron ore per se but we did import some amount of pallets from outside but I am hoping that in the weeks and months to come that we should be able to get our supplies back from SMPL and therefore our dependence on imports should not continue anymore. Secondly, the local producers, the private as well as the public producers in Orissa should be able to also meet the gap that we have in our requirements of iron ore.

Latha: Is there any inventory left at the Sarda iron ore mines?

A: We have our own stocks, which are lying there, which is more than 10 million. This is a stock for which we have already paid, this is basically our stock and once the mining operation is resumed, we should be able to draw up on these reserves.

Sonia: What is the utilization levels in the power business and what are the realizations at this point?

A: All the four 600 megawatt units which are under phase II are fully commissioned, COD tested. In the last quarter, we were running only one of the four units, it is partly the reason that the demand was subdued this being a winter time and the second is we also had the limitation on the coal supply. However, I do foresee that in the weeks as the demand sort of picks up and the coal supply situation improves, we should be able to run at least two-three machines.

Latha: What about international businesses, how is Oman doing? I believe it is doing relatively well but other businesses under a bit of problem to the operating profit?

A: You are quite right in saying that Oman is doing well. It has come to full production capacity and this will continue to do well but as far as the mines in Australia and Mozambique are concerned, the Austrian mine, we were waiting for the environment clearance. We have got the part of the environment clearance, the rest of it is underway and we are hoping that in the next couple of weeks, we should be able to get the second environment clearance and we are hoping to start the mining operations during March. With that, we should be able to mine about 150,000-200,000 tonne of coking coal on a monthly basis.

As far as Mozambique is concerned, there again we have had some issues with regards to logistics and moving the coal and evacuating the coal from the port. We are looking into those and we are also trying to sort of increase the production from the coal mine. So you would see that February onwards, the production in Mozambique would also pick up.

There is one thing that we have to remember that the commodity prices international have gone down. We are therefore also looking at the economics of mining them on each of these two locations because sometimes if we are getting the coking coal at the price, which are better than sourcing from our own mines at that time, we also go little slow on our own production because it is not just the cost of production, it is the cost of logistics also. So it is basically cost and benefit analysis, which drives us to take decision when it comes to production strategy.

Latha: Finally before we let you go, how many mines have you bid for in the upcoming auctions and if your debt has peaked, how will you fund these?

A: We have been funding our project requirements and other expenses out of our operating earnings.

If you see, in Q3 also we have kept the EBITDA level quite high. It is the best in the industry. We are at a level of 28-29 percent. So we just hope that with the pick up in demand and the NSR improving that the internal earning should become stronger and when it comes to bidding from mines, our decision to bid for mines is based on our own needs of coal. We are not into the trading business. Therefore, we will bid from the mines very selectively which are too close to our plants and which basically meet our requirements of coal both for steel as well as in the power plants.

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First Published on Feb 4, 2015 10:19 am
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