Sesa Goa Ltd., India’s biggest iron- ore exporter, plans to mine between 7 million to 8 million metric tons of the steelmaking ingredient in the three months to March 31, most of which will be exported to China.

“There is strong demand from China,” Managing Director Prasun Kumar Mukherjee said in a conference call today.

Sesa Goa, a unit of Vedanta Resources Plc, exports a majority of its
production to steelmakers in China and Japan. China, the world’s
largest buyer of iron ore, increased imports last year by 42 percent to
a record 628 million metric tons. China’s imports may climb 5.1 percent
to 660 million tons this year, Custeel.com analyst Du Wei said last
week.

The Panaji, Goa-based company’s shares fell 0.9 percent to 406.15 rupees at close of trading in Mumbai.

“The shares look expensive at current prices and there is not much
upside from here,” said Sumeet Singhania, assistant vice president at
Antique Stock Broking Ltd. in Mumbai, who has a “sell’ recommendation
on the stock. “If spot iron ore prices rise further mining in China
will become profitable, which will affect Sesa’s exports.”

Sesa Goa sold about 67 percent of its iron ore output in the cash
market and the rest on long-term agreements in the quarter ended Dec.
31. An increase in cash prices and demand from China pushed up
third-quarter profit by 76 percent.

‘Panic Buying’

Cash prices of 62 percent iron-content ore delivered to Tianjin port in
China reached the highest in at least 13 months on Jan. 8, according to
the Steel Index. Prices had jumped amid “panic buying” by Chinese mills
concerned about the availability of cargoes from Australia, Goldman
Sachs JBWere Pty. said.

Sesa Goa plans to spend about 15 billion rupees to raise iron ore
mining capacity to 50 million tons over two to three years, Mukherjee
said in the call today.

After completing the expansion, Sesa Goa’s output in its home state
will touch 30 million tons, while its capacity in the southern state of
Karnataka and eastern state of Orissa will reach 10 million tons each,
he said.

Source: Bloomberg

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