Severe constraints in supply of iron ore from the states like Karnataka and Goa where the mining was halted following the Supreme Court direction and a cap on the production in Odisha, the country has turned to imports of iron ore in the current fiscal. The country was the third largest exporter of iron ore till 2011 and lost its position owing to various factors.
Indian steel mills require about 145 million tonnes of iron ore per annum, while the domestic production is estimated at 130 million tonnes this year. After exporting about 15.05 million tonnes for the first eight months period ended November 2012, the steel mills had a shortage of about 30 million tonnes, forcing them to resort to imported ore.
According to industry sources, some of the steel mills imported an estimated 6-7 million tonnes between April and December 2012. Mills like JSW Ispat, Bhushan Steel and Essar Steel have imported ore for their port-based steel plants. JSW Ispat has also used imported iron ore for its plant in Salem and is actively considering the possibility of importing ore for its plant in Bellary.
Following the ban on mining in Karnataka, recent closure in Goa and very high export duty of 30 per cent coupled with higher freight rates on iron ore meant for exports by the Railways, iron ore exports have come down sharply during the current year.
According to Federation of Indian Mineral Industries (FIMI), India’s iron ore exporters have declined 62.33 per cent to 15.05 million tonnes during the first eight months of the current fiscal (April-November 2012) as against 39.95 million tonnes exported in the same period last fiscal. Since November, there have been no exports from the country.
However, the steel industry expects the availability of iron ore to further come down in the next financial year (2013-14) due to several constraints in many iron ore producing states.
In Karnataka, while the Supreme Court has permitted resumption of mining by Category A mines, only four mines have restarted mining in the last few days. These mines have so far produced about one million tonnes of ore. Whereas the Monitoring Committee has not put on auction this ore due to certain reasons.
Secondly, the state-owned NMDC, which has been allowed to produce one million tonnes per month in its Karnataka mines, is able to produce only about 700,000 tonnes due to logistic bottlenecks. The FIMI expects the production of iron ore in Karnataka at about 15 million tonnes during 2013-14 assuming some more mines in Category A and B resume mining. This would include about 8 million tonnes from NMDC. This means that the steel industry would end up getting only half of its requirements.
This means, all the steel mills operating in India might have to import iron ore or else shut down their operations.
According to Barclays Research, India’s iron ore production is likely to fall at a CAGR of 3.8 per cent over FY12-15 even as the demand is set to grow 8 per cent during the same period, positioning India as a net importer (ex-Goa) of iron ore from being the third-largest player in the global seaborne market as recently as 2011.
In Odisha, the state government has capped the iron ore production at 52 million tonnes and for miners, whose leases are pending for renewal, the capacity has been restricted only to meet their captive requirements.
In Goa, the reopening of mining is dependent on the direction from the Supreme Court. Once the mining ban is lifted the production is likely to be capped at 25 million tonnes, the Barclays Research said.
