Karnataka mining companies seek to restore capacity

Over 80 mining companies in Karnataka, producing nearly 45 million tonnes of iron ore a year, are seeking ways to restore a part of their mining capacity soon to avail of the high global prices.

The miners had cut over 70 per cent of their output due to oversupply after the state government suspended issuing export licences last July. Karnataka contributes nearly 30 million tonnes (mt) to India’s overall iron ore exports of around 100 mt. China accounts for around 85 per cent of India's iron ore exports, while the remaining 15 per cent is shared by Japan, Korea and a few other countries.

“We have been working out strategies to restore mining capacity in Karnataka to benefit from the high global prices. Since the Supreme court lifted a ban on exports, we started preparations for restoration of mining capacities. However, legal battles still continue whenever the state starts issuing export licences. The complete restoration of mine output would take at least six-seven months,” said an official of a mining company in the state.

Currently, mining in the state are almost at a standstill, with all private miners operating at less than 30 per cent of their capacity. Private mines are supplying small quantity of both lumps and fine ore to local steel mills.

State-owned National Mineral Development Corporation is, however, largely dependent on long-term commitments to large steel mills for lumps supplies. Around 87 per cent of the company’s ore output across the country is supplied to local steel mills. Nearly 13 per cent of the export commitment, however, is met through mines in other states. Hence, the company would not face a problem even if the export ban continues in Karnataka.

A massive stockpile of iron ore, estimated at 20-25 mt, lies in Bellari-Hospet, in Karnataka. MSPL Ltd’s total storage is estimated at around 1.1 mt.

The mining industry is concerned about the 20 per cent duty on ore exports. “Even if the ban is lifted, the 20 per cent duty would make Indian ore unremunerative. Right now, the situation is fine, since iron ore prices are rising. But this is in the short term. The prices would ease once the demand-supply mismatch narrows,” said R K Sharma, secretary general, Federation of Indian Mineral Services (FIMI).

An MSPL official said Chinese importers completed all purchases before January. The new season starts in April-May, for shipment in June. If the ban is lifted, Karnataka miners would start reaping the benefit in June, since they would try to clear their existing stockpiles first. A gradual restoration of the mining capacity will also begin by then to meet the pipeline inventory, he said.

Transportation activities are generally slow in the monsoon season and resume in September. For iron ore to be delivered in June, the contracts should ideally start now.