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Even as the steel makers have complained of acute shortage of iron ore in Karnataka, the miners have claimed a large quantity of iron ore lumps are left unsold at e-auctions. According to miners, as much as 3.37 million tonnes of iron ore lumps are lying at various mine heads, for which there were no bidders.
“Over the last one and a half years, we have seen almost 55% of lumps produced in the state were not sold in the e-auctions. Most of the steel mills have invested in the setting up of 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 Limited, a Hospet-based flagship company of Baldota Group.
As on August 15, 2013, a total quantity of 3.37 million tonnes of lumps is unsold including 530,000 tonnes of unsold lumps under fresh production category. With the present international prices, this is valued at Rs 1,500 crore.
The state-owned NMDC alone has an unsold lump stock of approximately 2 million tonnes, while the private sector miners have another close to one million tonnes of lumps in their mine heads.
“The net effect of unsold lumps would adversely affect the mining. Normally, 70% of ore produced in a mine is lumps and 30% is iron ore fines. Unless, we evacuate lumps, we cannot continue mining. How much and how long can we store lumps. It causes problem of storage. We have addressed the issue in Karnataka, but there is no relief as yet,” Ratolikar said.
The trend for moving to setting up sinter plants by mini blast furnaces units in Karnataka started in early 2012 with the lower conversion costs of converting fines into sinter along with abundant availability of iron ore fines. This has resulted in slump in demand for lumps. The accumulation of lumps at mine head is posing problem in fresh excavation by miners and the issue needs to be looked for designing effective solution, he said.
Referring to some of the Karnataka-based steel mills, which have enrolled for e-auctions, sourcing iron ore fines from Odisha, Jharkhand and Chhattisgarh at a much higher cost per tonne, he said the cost of sourcing of iron ore in e-auctions would work out to Rs 4,200 per tonne as against Rs 4,700 per tonne from other states.
The Blast furnace based Steel makers (Pig Iron plants) are the major users of lumps, which can use relatively soft ore with 10-40 mm in size. Such ore is predominately available in Bellary-Hospet sector. Since the start of fresh production from February 2013 onwards, most of the lump produced is suitable for this application only.
The Blast furnace based industry is relatively large scale and is organized. Due to the reasons mentioned above along with scale advantage and availability of high-grade iron ore fines, they have commissioned sinter plants, which also address their future capacity expansion plans. This also has lowered the demand for lumps in the sector, according to Federation of Indian Mineral Industries (FIMI).
FIMI data showed that unsold fines through e-auction are almost 17% of total offered quantity while unsold lumps are 52%, excluding NMDC.
“The argument by some sections of user industry that price of lump is sole deterrent for demand is not fully supported by the market data. Since the start of e-auction sales in September 2011, the variation in base price of high-grade lumps have been to the extent of Rs 800-1,000 per tonne . However this has not helped for enhancing the quantity of lumps sold through e-auction”, Ratolikar added.
