Miners go for steel

Domestic iron ore mining companies, especially those located in Karnataka, are turning to steel making as exports are getting bogged down by the imposition of Rs 300 a tonne export duty and rising rail freight rates.

Over the past year, freight charges, including port surcharge, have gone up by 31 per cent to Rs 735 a tonne. Also, the appreciation of the rupee vis-a-vis the dollar has lowered the realisation from exports despite a 24 per cent rise in global iron ore prices.

A number of small privately-held mining companies operating out of the iron ore belt (Bellary, Koppal, Chitradurga and Tumkur districts) in Karnataka have submitted proposals to the state government seeking permission to set up mini steel plants, sponge iron and pig iron plants. They have also proposed cintering plants to utilise iron ore fines.

The iron ore belt in Karnataka accounts for 30 per cent of the overall exports (90 million tonnes annually) from India. The state has the second-largest proven deposits of iron ore (3.5 billion tonnes) in the country.

Karnataka-based iron ore mining companies like HKT Mining, VSL Mining Company, Kariganur Mineral and Mining Industry, Hothur Steels, PM Mines and Minerals have all forayed into steel projects. Some of the mining companies, which have already established mini steel plants, are planning to expand further.

"Most of the small mining companies rely on spot trading of iron ore. However, spot trading has almost been suspended as domestic iron ore prices have gone risen. Mining companies with long-term iron ore mining leases are planning steel projects to maintain production and utilisation of the ore," said representatives of the Bellary-Hospet Iron Ore Mine Owners' Association.

Some of the big mining companies are also setting up steel projects. Prominent among them is the Obalapuram Mining Company, promoted by Karnataka's BJP legislator Janardhana Reddy.

The company, with operations in Karnataka and Andhra Pradesh, produces 5.5 million tonnes of iron ore annually, of which 1.5 million tonnes are exported to China.

Obalapuram Mining's holding company Brahmani Industries is in the process of establishing a 4.3 million tonne steel plant with an estimated investment of Rs 4,430 crore at Kadapa in Andhra Pradesh.

The project is designed to predominantly use iron ore fines from the Anantapur mines since it contains 85 per cent of high grade iron ore fines (68 per cent Ferrous content).