Tata Steel trials Canadian iron ore to hedge against future shortages
Tata Steel has booked its first bulk shipment of iron ore lumps from Tata Steel Minerals Canada to counter potential shortages as captive leases expire in 2030.
Tata Steel has booked a bulk shipment of iron ore lumps from Tata Steel Minerals Canada (TSMC), marking the first time the Indian steelmaker has sourced this key raw material from its Canadian arm for use in India, three executives familiar with the development said.
The move reflects a long-term plan by India's second-largest steelmaker to address potential iron ore shortages, as many of its captive leases are set to expire in 2030.
"Management decided to test the shipment, if the company faces shortage around 2030 when the captive mines are due to expire, they will have an option to explore," said the first of the three the executives cited earlier, all of whom spoke on the condition of anonymity.
The shipment consists of iron ore lumps with aluminium content below 1%, iron content of about 64%, and a size range of 10-40 mm, said this executive, adding that the shipment is expected to arrive at India's east coast.
At present, Tata Steel meets 100% of its iron ore requirements in India through its six captive mines located Jharkhand's Noamundi, and Odisha's Katamati, Joda East, Khondbond, Vijaya II and Koidahas. It also plans to expand mining at Odisha's Gandhalpada and Kalamang, according to the company’s FY25 annual report.
"This is a trial shipment from the Company’s mines in Canada. It will help us in better understanding the usage of such ores and offer options in future to use a combination of imported and domestic ores based on quality and value in use," a Tata Steel spokesperson said in an email response to Mint's queries.
Shares of Tata Steel settled 1.3% lower at ₹183.75 apiece on the BSE on Wednesday.
Tata Steel, through its Canadian subsidiary, owns iron ore assets in the Labrador and Northern Quebec regions of the country. In FY225, Tata Steel had an iron ore production of 40.5 million tonnes in India, and 3 million tonnes in Canada. Out of the 3 million tonnes, the Canada subsidiary shipped 2.4 million tonnes.
TSMC already supplied iron ore to its subsidiary in the Netherlands, according to two executives quoted above.
The trial also comes at a time when Tata Steel is restructuring its European operations, including shutting a blast furnace in the Netherlands as part of its green steel transition, potentially freeing up exportable volumes from Canada.
TSMC is a partnership between Tata Steel that holds a 82% stake and the Government of Quebec owning the rest 18%.
In FY25, the Canadian subsidiary reported an income of ₹1,422.33 crore and a loss of ₹1,457.06 crore.
The expiry of captive iron ore mines from FY2030 is set to reverse the iron ore security among private steel companies, according to a Kotak Institutional Equities report dated 8 December, 2025. “Majority of Tata’s operating iron ore leases will expire and we estimate a potential erosion of ~30-40% of its steel operating margins post-FY2030E," analysts Sumangal Nevatia, Siddharth Mehrotra and Keshav Kumar wrote in their report.
“The expiry of captive mines in FY2030, according to the MMDR Act would significantly increase Tata’s raw material costs from FY2031," the analysts said.
Tata Steel’s total iron ore requirement by around FY2031 is about 46.7 million tonnes per year, according to the Kotak analysts.
The steelmaker has taken a cautious stance on bidding for iron ore mines in auctions.
“A key consideration for participating in auctions is determining how much iron ore we want to keep as captive versus how much we can procure from the market," T.V. Narendran, managing director of Tata Steel, said on an earnings call last year. “If the bid premiums are very high, then it really doesn't make sense to have 100% captive because you can get it cheaper from the market."
Currently, Tata Steel has two iron ore mines in Odisha—Kalamang West and Gandhalpada—won through auctions at bid premiums of 100.1% and 141.3%, respectively. Bid premium refers to the extra amount that a company offers to pay the government over and above the base price or royalty for every tonne of ore they extract.
Early December last year, the steelmaker signed a memorandum of understanding with Lloyds Metals & Energy to explore mining opportunities in Maharashtra for increasing production of iron ore. It also announced the acquisition of a 50.01% stake in Thriveni Pellets Pvt. Ltd (TPPL). Pellets are small, hardened balls made of iron ore and used in steel production.
For coking coal, another key raw material, the steelmaker has diversified sourcing from the US, Mozambique, and Canada, and holds long-term contracts with strategic metallurgical coal suppliers to ensure supply security.
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