Mumbai: Iron ore exporter Sesa Goa expects to sell higher volumes of iron ore in the March quarter on strong demand from local and overseas steel firms and higher output in its home state of Goa.
Sesa, a unit of London-listed Vedanta Resources reported a 29% rise in third-quarter profit, late on Monday, but revenue growth was subdued due to lower volumes.
It sold about 5.4 million tonnes of iron ore in the quarter, down a fifth from a year ago, as an export ban in the southern state of Karnataka and an extended monsoon hit operations at its home base of Goa, during the quarter.
Volumes were down 18% in Goa, 26% lower in neighbouring Karnataka, while logistical constraints pulled down volumes 32% in eastern Orissa state.
“Volumes should be much better this quarter. We are reasonably confident of achieving 8 million tonnes,” managing director Prasun Mukherjee told Reuters in an interview.
“Monsoons will not impact operations this quarter. We are also trying to impress on the Goa government to ease transport restrictions,” he said.
The company reported volumes of 7.4 million tonnes for the March quarter a year ago.
Iron ore prices are expected to remain firm due to improving sentiment on steel demand globally, Mukherjee said. Sesa currently earns profit of between $65 and $70 per tonne of ore.
“At this rate, it is a very lucrative business,” said Mukherjee, whose company sells most of its output near spot market rates.
Global crude steel production touched a new record in 2010, driven by growth in emerging regions and improving manufacturing in the developed world, the World Steel Association said on Monday.
India is the world’s third largest supplier of iron ore, with about half of its total output of more than 200 million tonnes landing in China, which houses the world’s largest steel industry.
Sesa Goa, which has been looking to diversify its business, is eyeing the acquisition of steel mills to take advantage of its iron ore supplies.
The firm recently bid Rs206 crore to buy debt-laden steel producer Bellary Steel & Alloys Ltd, which holds a half-constructed steel plant with a capacity of 0.5 million tonnes in south India.
India’s third largest steelmaker, JSW Steel Ltd, had emerged the highest bidder for Bellary, although the Delhi High Court has stayed the sale process, Mukherjee said.
“We are constantly on the lookout to buy fully functional steel mills. Funds will not be a constraint,” Mukherjee said.
The company had about $2 billion of cash reserves at December end.
Sesa is also buying 20% stake in Cairn India, as part of Vedanta’s $9.6 billion acquisition of majority stake in the Indian oil and gas explorer.
At 0853 GMT, shares in Sesa Goa were down 0.8% to Rs327.50, in a weak Mumbai market.