Odisha eases sales restriction on ore from lease-expired mines

Traders say supply to get a boost of 10 million tonnes

The Odisha government has allowed miners working under special conditions after expiry of lease validity to sell iron ore raised before October 2012 in the open market, which traders say would boost supply by around 10 million tonnes (mt).

"The lifting of the restriction would enable miners to sell iron ore and fines stacked since October, which would be somewhere between nine and 10 mt. It’s a welcome step and will boost ore availability for steel makers,” said Prabodh Mohanty, a spokesperson for the East Zone Miners' Association.

However, the easing has come with a rider that the miners must reserve half of the mineral for domestic steel makers and the other half could be exported or sold to out-of-state buyers.

The recent change in norms is an amendment to the October 2012 executive order of the state government. In that order, the government had instructed mining lease holders operating under the ‘deemed extension’ clause of the Mineral Concession Rule (MCR), 1960 and waiting for second and third renewal of their mining leases to produce the mineral only as per their captive requirement. The order had also barred export of the mineral from these mines.

Many large miners of the state such as Aditya Birla Group-managed Essel Mining, Rungta and KJS Ahluwalia had to halt operations at some of their mines due to the October resolution of the state government. The recent order provides an opportunity for them to sell iron ore and fines stacked since October.

Steel makers and pellet producers such as Brahmani River Pellet Ltd, a Stemcor group company, and Essar Steel, which has a six-mt pellet making plant at Paradip, said the move would pressurise prices.

“We hope the additional supply would result in some correction in the prices of iron ore fines,” said Shivaramkrishnan Hariharan, chief executive officer of Essar Steel Odisha.

Trade sources said the prices of fines could come down by another Rs 300 per tonne. "The iron ore fines rates have come down significantly in the last one week, from Rs 2,200 per tonne to Rs 1,800. The recent boost in supplies should pressurise the rates to the level of Rs 1,500 per tonne,” a source said.

The revision authority of the Union mines ministry last month imposed a stay order on the October 2012 decision of the Odisha government, enabling the miners waiting for a second and subsequent renewal to resume production. This would also help bring down the rates, the source added.

But miners said since rates are already down because of other restrictions imposed by the state government, the release of the stocked iron ore would not make any significant impact on prices. “The rates are already lower here due to the December order of the Odisha government to reserve half of the monthly iron ore output for local units. The release of the old stocks will not have any major impact on prices,”said an official of Rungta Mines.