Backward integration and raw material security

Our captive iron ore mines in Karnataka and Odisha provide us the much-needed security, stability and quality in raw material supply. In the past fiscal, we operationalised all our newly acquired mines, thus fully integrating our steel business across the value-chain. This has already started to buoy our margins significantly, while guarding us against price, supply and quality risks.

Capitals deployed

Natural
Capital

Intellectual
Capital

Capitals enhanced

Financial
Capital

Manufactured
Capital

Key trends

15.78 MnT

Captive iron ore consumption

1,029 MW

Total capacity of the Group’s
captive power plants*

* Vijayanagar Works by captive power generation of 865 MW; Dolvi Works by a 67 MW captive
power generation and long-term power purchase arrangement with JSW Energy Limited; and Salem
Works by a 97 MW captive power generation.

Key trends

  • Geopolitical tensions
  • High input costs in terms of coal
  • Opening up of new mining leases in India

Material issues

  • Business ethics
  • Economic performance
  • Human rights
  • Sustainable mining
  • Supply chain sustainability

Key risks

  • R2 Geopolitical scenario – the Russia-Ukraine conflict
  • R5 Raw material availability and cost – Iron ore and Coking coal
  • R6 Mining

Strategic advantages of Odisha mines and way forward

The acquisition of iron more mines in Odisha (with reserves of     ~1.1 billion tonnes) presents us with several benefits, including:

01

Strategic long-term iron ore security for Dolvi and Salem Works

02

Consistent and high-quality iron ore grade to enhance brownfield productivity

03

Opportunity to optimise and significantly reduce logistics cost over time

We are presently in the process of strengthening mining operations in Odisha, with an estimated outlay of ₹3,450 crore over two years. This is expected to help in:

01

Enhancing own mining infrastructure to reduce reliance on outsourced mining

02

Grinding and washing facilities to improve ore quality, aiding higher productivity at the steelmaking operations

03

Implementing digitalisation across the mining operations

Coal

Coal is an essential raw material for operating our blast furnaces and manufacturing processes. The criticality of its availability and consistency in quality are key success factors. However, of late, global demand-supply mismatch has resulted in lesser availability of coal in the market, thereby priming up coal prices and hence, our input costs.


While we hedge our risks with long-term contractual agreements, we have also acquired coking coal mines in West Virginia, US, and coal mining concessions in Mozambique.

In India as well, we secured the ‘Moitra’ coking coal block in Jharkhand in 2015, which is expected to contribute to our coal availability and security upon its full operationalisation. We are also participating in coal auctions for newer coal mining licences being auctioned by the government, to further augment our raw material security.

Outlook

Near-term outlook
  • Continue operations across the acquired mines that meet the cost-efficiency and sustainability goals of the business
  • Enhance mining capabilities and efficiencies at Odisha with an estimated capex of `3,450 crore to reduce reliance on outsourced mining; expected completion within two years
  • Add grinding and washing facilities to improve the quality of ore, aiding higher productivity at the steelmaking operations
  • Continue to focus on enabling better logistics handling
  • Evaluate and develop a slurry pipeline in Odisha, connecting Nuagaon mine with Paradip port
Long-term outlook
  • Target to source up to 50% of the iron ore requirement captively
  • Participate in the government’s iron ore and coal auctions to improve backward integration
  • Evaluate opportunities to increasingly use domestic coal and continue diversification of coal sources