Despite India being the world's third largest producer of iron ore, leading Indian steelmaker JSW has announced that it will be importing 0.5Mt of high grade iron ore every month in order to maintain optimum capacity utilisation.

In total, the company claims it will be importing, mainly from South Africa and Canada, 6Mt of iron ore per annum, which is 20% of its annual needs, according to Seshagiri Rao, joint managing director and CFO of JSW Steel.

Mine closures in Odisha and delays in re-opening mines in Karnataka and Goa have led to acute iron ore shortages in India.

JSW is mainly importing high grade ore with an FE (iron) content of 65% and is buying at $91 to $92 per tonne, according to a report in India's Economic Times. International prices are hovering around the $94 to $95 per tonne range.

According to Rao, JSW hopes to save money through lower fuel consumption as its imported ore is low in alumina.

Mining problems in India have reduced capacity utilisation for Indian steelmakers. The 2013/14 figure of 77% is down from the 2011/12 figure of 88% and this is all down to issues in key mining areas such as Karnataka, Goa and Odisha. In fact, iron ore output has suffered with only 144Mt produced in the 2013/14 period compared with 208Mt in 2009/10. It is estimated that ore production this year will fall even further – to 100Mt against demand of 136Mt.

Supply problems in India have led to higher iron ore prices when compared to the international market (where prices have fallen by 30%.

The report in Economic Times states that steelmakers in India are in the process of lobbying government for an effective raw material policy. They want a 2.5% duty on iron ore imports removed. Rao claims there is little justification for the duty. It is thought that the government will look favourably on Indian steelmakers' demands as it is only too aware of the importance of raw materials supply for domestic producers.

JSW's planned iron ore imports of 6Mt/yr are believed to be the highest by any domestic steel producer in India, it is claimed.