Rake shortfall keeps steel, pellet makers in a bind

An industry source said the wagon shortage for iron ore transport had reached 75 per cent

An acute shortfall of railway rakes meant for iron ore movement has hurt the supplies of the raw material to steel and pellet manufacturers across the country.

As rakes are getting increasingly diverted to meet the coal requirement of thermal power producers, there are not enough rakes to despatch iron ore. An industry source said the wagon shortage for iron ore transport has reached to 75 per cent.

"Nearly 75 per cent of the steel industries operating in the country are dependent on external iron ore supplies.There is a growing crisis of iron ore supplies to steel and iron ore pellet units as adequate rakes are not available. Stocks of ore within steel plants is tapering and the units are operating below their design capacities”, said a senior executive with a steel company.

Coal demand has risen due to fall in nuclear power and hydro-power generation. This has led to more rakes being diverted for coal movement to independent power producers (IPPs). The thrust is on more allocation of rakes for coal for IPPs, resulting in lesser supplies of coal and iron ore to the steel and pellet industries that are now operating below the utilisation level.

A leading miner in Odisha admitted that the rake shortage for iron ore had turned critical. “For each key iron ore freight loading point in the state, we are getting only a third of the actual requirement of rakes. The situation has hurt iron ore despatches within the country and also exports,” he added.

Both the Indian Steel Association (ISA) and Pellet Manufacturers' Association of India (PMAI) have moved the Union Steel Ministry on the rake crisis. They have demanded that the rake allocation for pellet and steel industries need to be at par with coal for IPP.

"Allocation of rakes for pellet exports should be on priority over the export of iron ore fines and other minerals considering iron ore pellet as an environmental friendly and value-added commodity and can contribute to the foreign exchange reserve of the country in a bigger way than mineral export”, said a pellet manufacturer.

Rakes meant for Paradip, Dhamra and Gangavaram ports from iron ore-rich Barbil in Odisha have to be moved through the Jaroli railway station. The single railway line of Banspani-Tomka-Jakhapur section of South Eastern Railways (SER) and East Coast Railways (EcoR) has the maximum capacity of 10 rakes per day. Due to limited capacity, this route causes frequent congestions and restrictions in rake allotments. Doubling of the Banspani-Tomka-Jakhapur section could help in easing out the logistics constraints.