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Despite steel makers complaining of an acute shortage of iron ore in Karnataka, miners have claimed there were no bidders for 3.37 million tonnes (mt) of iron ore lumps at e-auctions.
“Over the last one and a half years, we have seen 55 per cent of the lumps produced in the state weren’t sold at e-auctions. Most steel mills have invested in setting up sintering plants and use only iron ore fines to convert into sinter and use as raw material in their blast furnaces. So, they don’t need lumps anymore,” said Mohit Ratolikar, general manager, MSPL Ltd, a Hospet-based flagship company of the Baldota Group.
As on August 15, 3.37 mt of lumps were unsold, including 5,30,000 tonnes of unsold lumps under the fresh production category. At current international prices, these are valued at Rs 1,500 crore. State-owned NMDC alone has an unsold lump stock of about two mt, while private sector miners have an additional one mt of lumps at their mine heads.
“The net effect of unsold lumps would adversely affect mining. Typically, 70 per cent of the ore produced in a mine is lumps, while 30 per cent is iron ore fines. Unless we evacuate lumps, we cannot continue mining. How much and how long can we store lumps? It causes a problem of storage. We have addressed the issue in Karnataka, but there is no relief yet,” Ratolikar said.
In early 2012, mini blast furnaces units in Karnataka started setting up sinter plants. This helped reduce the cost of converting fines into sinter and ensured the availability of iron ore fines. It also led to a fall in the demand for lumps. The accumulation of lumps at mine heads was leading to hurdles in fresh excavation by miners, Ratolikar said.
On some Karnataka-based steel mills that had enrolled for e-auctions sourcing iron ore fines from Odisha, Jharkhand and Chhattisgarh at higher costs, he said the cost of sourcing iron ore through e-auctions was Rs 4,200 a tonne, against the cost of Rs 4,700 a tonne in sourcing from other states. Blast furnace-based steel makers (pig iron plants) are the major users of lumps; these can use relatively soft ore (10-40 mm). Such ore is predominately available in the Bellary-Hospet sector.
“The argument by some sections of the user industry that the price of lump is the sole deterrent for demand is not fully supported by market data. Since the start of e-auction sales in September 2011, the variation in base prices of high-grade lumps has been Rs 800-1,000 a tonne. However, this has not helped enhance the quantity of lumps sold through e-auctions,” Ratolikar said.
