SAIL expects 7-8 million tonnes of iron ore sales this year

Steel Authority of India Limited (SAIL) expects to sell 7 million to 8 million tonnes of iron ore this year, compared with its 10 million-tonne internal target, after reporting Rs 388 crore of profit on first-half sales of 2.46 million tonnes. Management cited pricing and permit issues in Jharkhand and operating challenges at newer Chhattisgarh mines.

What is SAIL's iron ore sales target this year?

SAIL expects iron ore sales of 7 million to 8 million tonnes this year. Management said its memorandum of understanding target is 7 million tonnes, while the internal objective had been 10 million tonnes. The lower expected range reflects mine-level constraints rather than a revision to the stated memorandum target.

SAIL sold 2.46 million tonnes in the first half, leaving 4.54 million to 5.54 million tonnes to be sold in the second half to reach its expected range. Management did not give a confirmed quarterly breakdown, instead offering rough estimates of about 1 million to 1.2 million tonnes for each of the first two quarters. It said it was planning a major increase in third-quarter and fourth-quarter sales.

The second-half acceleration depends on resolving operational constraints and adding supply from Chhattisgarh. SAIL has already started sales from Dalli-Rajhara and is assessing sales from Rowghat, where management expects the major part of the future Chhattisgarh contribution to originate.

How much profit did SAIL make from iron ore sales?

SAIL reported Rs 388 crore of profit from iron ore sales in the first half, against Rs 124 crore in the corresponding period a year earlier. Management described the year-on-year increase as Rs 265 crore, although it did not disclose a realised iron ore price per tonne or an earnings before interest, tax, depreciation and amortisation measure for the business.

The first-half profit was generated on 2.46 million tonnes of sales, while management said iron ore prices varied with market conditions. That means the call did not provide enough information to separate the Rs 388 crore contribution into price, grade, processing and volume effects. It nevertheless shows a higher profit contribution than the Rs 124 crore reported in the comparable prior-year half.

SAIL's sales programme covers more than standard mined ore. Management said low-grade material is available across its mines, including material in SGF dumps and tailings. Some material is beneficiated for internal use, while other material is sold directly, so the 7 million-to-8 million-tonne sales expectation depends on the volume available for external marketing.

What is limiting SAIL's higher iron ore sales?

SAIL said pricing and permit issues at the Jharkhand Group of Mines are limiting a larger sales increase. Management distinguished permit matters from approvals and said the issue was not exactly an approval problem. It added that the Odisha Group of Mines did not face the same issues.

Government-related and pricing-related matters also affect sales of lower-grade ore, SGF dumps and tailings in Odisha and Jharkhand. SAIL said it was seeking a breakthrough before increasing these sales. It already sells some tailings in Odisha, but management did not quantify the volume, price or profit contribution from those transactions.

Chhattisgarh creates another potential outlet, but Rowghat is still a new operating mine with ground-level challenges. SAIL said Dalli-Rajhara sales had started and Rowghat sales were under consideration. The difference between the 10 million-tonne internal target and the 7 million-to-8 million-tonne expectation reflects the effect of these constraints on the planned second-half jump.

How will SAIL use lower-grade iron ore?

SAIL currently uses both beneficiation and direct sale for lower-grade iron ore. In Chhattisgarh, it processes lower-grade ore through a silica reduction plant and an SBP beneficiation plant, and management said it planned to increase the quantity handled through these facilities. The call did not disclose processing costs for ore containing 48% to 50% iron.

In Odisha and Jharkhand, SAIL has low-grade material in SGF dumps and tailings and is trying to sell much of it. Odisha has already generated some tailings sales, while Chhattisgarh beneficiation supports internal consumption. Management did not disclose how much of the 2.46 million tonnes sold in the first half came from tailings, dumps or regular mined ore.

SAIL also plans future beneficiation facilities at Gua mines to process more subgrade ore, pelletise it and consume the pellets internally. Separately, its 2 million-tonne-per-year pellet plant at Rourkela Steel Plant was in advanced stages and was on course to start according to its set timelines, management said. No commissioning date for the Gua beneficiation facilities was given.

Can Rowghat and Gua lift SAIL's iron ore output?

SAIL said Rowghat is on track to increase output in stages, starting from interim mining. The mine development operator has begun work, and SAIL has environmental clearance for 3 million tonnes during interim mining. Management said the mine was nearing that level, while main mining by the operator could begin in another year or more.

Management outlined a phased Rowghat path from 2 million tonnes to 3 million tonnes, then 4 million, 6 million, 9 million and eventually 14 million tonnes over three to four years. The output path is distinct from the 7 million-to-8 million-tonne external sales objective because not all mined ore must be sold outside SAIL's steelmaking operations.

At Gua, SAIL plans to increase production from 4 million tonnes to 10 million tonnes by appointing a mine development operator, although it said clearances and other requirements would take more time. For the current year, SAIL's production target is 56 million tonnes, but management expects 48 million to 50 million tonnes after producing about 20 million tonnes in the first half.

Conclusion

SAIL's first-half iron ore sales generated Rs 388 crore of profit on 2.46 million tonnes, compared with Rs 124 crore in the corresponding period last year. Reaching the expected 7 million-to-8 million-tonne range would require substantially higher second-half volumes, while the 10 million-tonne internal target now appears beyond management's stated expectation.

The next issues to watch are progress on Jharkhand pricing and permit matters, further sales from Dalli-Rajhara and Rowghat, and Rowghat's move from interim mining toward its 14 million-tonne trajectory. Management also said Gua's planned expansion from 4 million tonnes to 10 million tonnes remains dependent on clearances and other steps.