Steel firms oppose move to lift restriction on iron ore export

Domestic iron ore output in FY14 set to drop to around 110 MT, lowest in recent years

The Centre’s proposed move to remove constraints in the export of iron ore and other minerals has raised fresh concern among steel makers. They fear easing of these restrictions at a time when the industry is facing acute shortage of raw materials would add to their woes.

Last week, while addressing an Assocham event, Prime Minister Manmohan Singh had said the government would do the needful to smoothen iron ore export to boost overall exports and bring down the current account deficit (CAD).

While the PM has not spelt out the measures, the miners are looking forward to withdrawal of 30 per cent export duty on iron ore and removal of differential railway freight charged on ore meant for exports.

“It will be a disaster for the steel industry, as we are already facing shortage of iron ore and there is not enough production of ore in the country,” said Seshagiri Rao, joint managing director and group chief financial officer of JSW Steel.

Due to shortage of ore, most steel companies are working at lower capacities. “Last year, the entire steel industry produced only 72 million tonnes as against a capacity of 100 million tonnes when the country produced 140 million tonnes of iron ore. This year, ore production is estimated to be lower than last year as Goa has gone out of production and several mines are yet to get all approvals to start mining in Karnataka,” he added.

The Federation of Indian Mineral Industries estimates  ore production at 100-110 million tonnes for 2013-14, an all-time low in recent years and a decline of about 25 per cent over the last financial year. In 2012-13, India produced 140 million tonnes of the ore.

“Last year, Karnataka auctioned about 25 million tonnes and Goa contributed till the first half of the fiscal. This year, there is not much on Goa resuming production. The slow progress in giving forest and environmental approvals to mines in Karnataka will affect the overall production,” said R K Sharma, secretary-general.

  However, welcoming the PM’s announcement on removing restrictions on  export of ore, he said there were not many opportunities for export this year, except in the eastern sector. “We can expect iron ore exports to happen from Jharkhand and Odisha in a limited quantity this year,” he said.

In Karnataka, JSW Steel is operating its 10-million tonne per annum steel plant between 75 and 80 per cent capacity.  BMM Ispat, Kalyani Steel and Sathavahana Ispat are operating between 30 per cent and 60 per cent. As many as 54 of 72 sponge iron units have shut down due to shortage of ore.

According to Rao, companies might have to resort to imported ore this year, too, due to the shortage. In FY13, Indian steel makers imported three million tonnes of ore for coast-based plants. Besides, the country might have to increase  import of finished steel, while keeping domestic capacity idle. Last year, India imported 8.3 million tonnes of steel worth $7 billion. “The government should see that domestic steel mills get adequate raw material and encourage export of finished goods, which will help in bringing down the CAD,” Rao added.