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Despite the slowdown in the economy, NMDC plans to ramp up mining capacity to 50 million tonnes (mt) a year by 2014-15. Chairman C S Verma, in an interview with Mansi Taneja, says this financial year the demand for iron ore would remain conducive in the domestic and export market. However, he cautions, overcapacity would lead to pressure on steel prices. This would put pressure on the prices of raw materials, including iron ore. Edited excerpts:
Production from your Chhattisgarh mines has fallen. The mining ban in Karnataka is also likely to hit production. How to plan to tackle these?
In 2012-13, iron ore production from Bailadila fell to about 18.8 mt from 21.5 mt in 2011-12, owing to the breakdown of Essar’s slurry pipeline. To overcome it, a uniflow system has already been commissioned by NMDC. Soon, in-motion weighbridges would also be commissioned and this would improve the turnaround time of rakes in the circuit. Additionally, the railways is being pursued for an increase in the availability of rakes in the circuit. With all this, we are confident in 2013-14 we will be able to achieve production of 21.5 mt from Chhattisgarh, even if Essar’s slurry pipeline remains non-operational through the year. The mining ban in Karnataka hasn’t had an impact on NMDC’s operations.
What steps are you taking to ramp up production capacity?
Currently, we have an iron ore mining capacity of 32 mt a year—-25 mt a year from Chhattisgarh and seven mt a year from Karnataka. By commissioning new mines and augmenting production from existing ones, we have planned to increase our iron ore mining capacity to 50 mt a year by 2014-15.
When do you expect production from the Australia mines to start? Would you import iron ore from there or sell the material abroad?
NMDC is the major shareholder in Legacy Iron Ore Ltd, listed on the ASX (Australian Securities Exchange). It has exploration tenements in iron ore, coal, gold and manganese. Currently, Legacy is undertaking exploration in its tenements.
To secure assured raw material supply, are you considering acquisitions of mines abroad? Have you initiated talks for this through International Coal Ventures Private Ltd (ICVL), your venture with other public sector undertakings?
Yes, NMDC, on its own and through ICVL, is pursuing various acquisition opportunities for coal in the US, Australia and Indonesia. It plans to acquire raw materials for steel making and various other mineral assets. We are reviewing proposals of coal and other minerals in various countries globally. The assessments of these projects are in various stages; we are bound by confidentiality agreements for these assets. Based on the outcome of due diligence, a view would be taken.
What is the iron ore pricing trend since January this year, for both lumps and fines? Do you foresee a rise in prices?
Lump ore prices have been fixed from month to month since January this year—-from Rs 5,060/tonne to the current Rs 4,200/tonne. Fine ore prices have come down marginally—-from Rs 2,610/tonne in January to the current Rs 2,510/tonne.
NMDC’s iron ore prices are a function of various factors such as the iron ore demand-and-supply environment, the prevailing iron ore prices in the domestic market, etc. Typically, in any financial year, the period after the monsoon is a good time for the iron and steel market. So, we expect the market to remain good in the coming period.
What is your outlook for the industry and the general state of the economy?
Two years of industrial slowdown have dampened demand and slowed activity in the services sector as well. The high level of inflation, particularly the rising food prices, soaring oil prices and a cut in investment, are raising concerns over macroeconomic stability. Besides, the recent weakening of the rupee is leading to concern on the fiscal deficit.
However, it would be an appropriate time to introduce structural reforms that would kick-start the process of economic recovery, provide macroeconomic stability, stabilise inflation and boosts investor sentiment.
In 2012-13, the demand for iron ore was encouraging, primarily due to high domestic demand and favourable demand from China.
Global steel capacity has accelerated through the past decade at about two billion tonnes/year, above the global annual output level of about 1.6 billion tonnes/year. Due to saturation in the steel industry, iron ore prices were impacted and remained subdued during 2012-13.
