JSW Steel Ltd.  one of India's largest steel producers, is planning to increase its import of iron ore to take advantage of sliding international prices that are near two-year lows, people with direct knowledge of the matter said.

The company is planning to increase its imports by between two million and three million metric tons in the financial year that began April 1, they said, on top of an earlier plan to import a total of about six million tons during the period.

Meanwhile, iron ore prices have fallen below a psychological mark of $90 a ton and are now quoting about $88.2 a ton after demand for steel in China has fallen because of a weakening economy and poor housing sales.

Until two years ago, India was the third-largest exporter of iron ore, but a series of mine closures to prevent illegal mining, combined with rising export taxes and railway-freight charges, have shrunk supplies to both domestic and global markets.

"These days it is hard to get quality iron-ore grades from within India," said an industry executive. "You get far-better-quality grades through imports, which helps margins."

Typically, it takes about two tons of Indian-grade iron ore to produce a ton of steel, compared with about 1.5 tons of imported iron ore, the executive added.

India is expected to import between 10 million and 15 million metric tons of iron ore this financial year, which may be about the same level it will export.

India's domestic iron-ore production is expected to fall by 7% to about 125 million tons this financial year. A majority of mines in two important provinces—Karnataka and Goa—have yet to resume normal operations despite a partial lifting of court-ordered mining bans.

The price of Chinese rebar, a reinforcing material used in building construction, has fallen to its lowest since January 2006, hampering purchases by domestic steel mills suffering from tight credit conditions.

Some China steel companies have been trying to counter the slowing domestic demand by stepping up exports of steel to Southeast Asia, the Middle East and India.

Source:- online.wsj.com