Low-grade iron ore demand falls

With the demand for low-grade iron ore (containing less than 62 per cent ferrous), which accounts for 35 per cent of India's total exports (92 million tonnes), coming down gradually, small mine owners and traders are worried over their future prospects.

The Chinese steel mills were accepting all grades of iron ore for the last five years. However, now, they have started upgrading the grade capacity (in excess of 62 per cent ferrous) of their blast furnaces. Consequently, Indian iron ore exporters are being asked to quote prices for medium grade iron ore (containing more than 63 per cent ferrous) and above.

However, not all Indian exporters are in a position to supply medium and high grade iron ore to the Chinese steel mills. The low-grade iron ore has to be up upgraded through a process of beneficiation, which requires a minimum investment of Rs 60 crore.

"We cannot afford to make such huge investments to set up beneficiation plants. If the Chinese steel mills reject low grade ore, our situation will turn worse. Besides, the stockpile of low-grade ore could increase drastically in the mines," a representative of the Bellary-Hospet Iron Ore Miner Owners' Association (BHIMOSA), told Business Standard.

A significant share of the BHIMOSA members export low-grade iron ore to China directly without beneficiation. "Most of the Chinese mills are upgrading Indian iron ore with Brazilian and Australian ore. We have requested them to continue the same process. But that does not seem to be happening. Chinese steel mills are insisting on medium- and high- grade ore," they pointed out.

According to the Federation of Indian Mineral Industries (FIMI), Goa has the maximum number of beneficiation plants in India. "Most of the big players from Goa such as Chowgule Group and Sesa Goa have a number of beneficiation plants. Goa has primarily low grade iron ore deposits. Therefore, the exporters have no option other upgrading the ore before sending the stock to China. We do not see any beneficiation plant coming up in other part of the country," S B Chauhan, advisor, FIMI, said.

The low-grade iron ore is sold for less than $100 per tonne whereas the high-grade iron ore commands a price in excess of $120. While the high -grade iron ore (containing 64 per cent ferrous) accounts for 20 per cent of the total exports, the medium-grade's share in the overseas sales is 44 per cent.

The FIMI is encouraging setting up of beneficiation plants, but small mine owners and traders are not willing to take the risk. "We purchase iron ore from other companies and rely on spot trading only. We are not sure if the demand for Indian iron ore will continue to remain the same," L N Prasad, Sai Mineral Exports, said.

The FIMI has suggested an alternative to such traders "" upgrade low-grade ore using high-grade ore "" and minimise the beneficiation process.