JSW Steel Limited, the third largest steelmaker of India is likely to buy assets owned by Stemcor Holdings Limited, a British company, which owns an iron ore mine Odisha. The deal for buying its pellet plant and the slurry pipeline is presently in an initial stage. Stemcor produces about 5 MnT of the key raw material each year and has 100 MnT as reserves.
Stemcor is under a debt of US$ 1.2 bn from a conglomerate of banks which has to be repaid and for this they are selling away their assets. They have appointed Goldman Sachs which will help them in finding Indian buyers for their assets which are valued at Rs 65 bn. The Stemcor owned ventures in India comprise of iron ore mines, iron pellet plant and a slurry pipeline connecting the iron ore mines with the pellet plant in Odisha.
JSW has a capacity of producing 14 MnT of steel every year. They do not own any iron ore mines in India and buy raw material for manufacturing the finished product. They own a steel plant in Karnataka and used to get the raw material from the state as it is the second largest iron ore producing state of India. Their production capacity was hampered when Supreme Court had banned mining in Karnataka in July 2011. The mining operations were ordered to be resumed by the Supreme Court later on September 3, 2012.
JSW needs to pile up the stocks of iron ore for its steel industry. Thus they are interested in buying Stemcor assets. If the deal with Stemcor gets finalized, JSW will also have iron ore mines and will not face raw material shortage for their steel plants.