Australia's Rio Tinto, the world's second largest iron ore miner, will sell iron ore to Essar Steel.
In its first-ever sales to the country, Australia's Rio Tinto, the world's second largest iron ore miner, will sell iron ore to Essar Steel. Rio Tinto will supply about 160,000 tonnes of Pilbara Blend fines later this month to Essar Steel.
Essar Steel explained that the imports from Rio Tinto were an alternative raw material source, in addition to iron ore supplies under its contract with domestic suppliers, to ramp up the company's production capacity at its Hazira plant.
"Essar Steel is in the process of commissioning its new assets for increasing steel production capacity from 4.6 million tonne per annum (mtpa) to 10 mtpa," an Essar Steel spokesperson said. "In order to optimise operations of these units and ramp up capacity, iron ore from international sources is being considered," he added.
Essar"s move comes as a surprise given the vast reserves of iron ore in India. Total iron ore reserves in India currently stand at 7.06 billion tonne, with another 20 billion tonnes or so of unproven reserves waiting to be explored. Iron ore demand from the steel industry is at around 50% of the total iron ore production in India, and the rest is exported.
Local steel mills, including Essar, have been asking the government to lessen the volume of exports to cut the escalating local iron ore prices. Essar"s move to take Australian ore for the first time would appear to be a trial hedge against these rapidly rising local prices.
The 160,000 tonnes of Rio's Pilbara Blend Fines to Essar Steel will be loaded on the Genco Claudius ship at Dampier in late December, for shipment to the Hazira port, western India, for unloading.
With the growing steel demand in India, Rio has ambitions to launch iron ore production in Orissa, where it has a 51% stake in a joint venture with the state-owned Orissa Mining Corp, which holds rights to iron ore leases.