Iron ore imports set to rise 67% to 5 mt in FY14

The production of iron ore in India is likely to remain around 140 million tonnes this year due to ban in Goa, slow progress in resumption of mines in Karnataka and cap in Odisha

The domestic steel industry, which is facing acute shortage of iron ore, is likely to increase its dependence on imported iron ore for this year as well. The continued ban in Goa, a delay in accordance of environment and forest clearances for several mines in Karnataka and a cap on iron ore mining in Odisha have resulted in a drastic decline in iron ore production.

The steel industry imported 3.05 million tonnes (mt) of iron ore in 2012-13, mainly for port-based steel mills. On account of reduced iron ore production and regional shortages of iron ore last year, major steel units like Essar Hazira, Bhushan Steel and JSW Ispat had to resort to imports of iron ore. Compared to 970,000 tonnes of iron ore imported in 2011-12, the imports in 2012-13 have gone up 3.1 times. However, during the current financial year, iron ore imports are likely to go up 67 per cent to around 5 mt. This is mainly due to lower production of iron ore domestically.

The country was the third largest exporter of iron ore till 2011 and lost its position owing to various factors. According to the Federation of Indian Mineral Industries, a very high export duty of 30 per cent, coupled with higher freight rates on iron ore meant for exports by the railways, iron ore exports have come down sharply during the last financial year. Production of iron ore has come down from 218 mt in 2008-09 to 140 mt in 2012-13 due to enforcement of strict environmental and other regulatory measures. The country had seen a surplus of almost 110 mt in 2008-09 and 2009-10. However, this has come down to a level of just 17 mt in 2012-13.

Most steel plants are operating at sub-optimal levels because of non-availability of iron ore, leaving thousands of crores of investment stranded. The capacity utilisation of steel mills was only around 81 per cent and produced 78.3 mt of steel in 2012-13.

The country witnessed its lowest ever ore export in 2012-13, estimated at close to 18 mt, a decline of 69 per cent over the previous year. India exported 61.8 mt in 2011-12.

“The production of iron ore is expected to remain at the level of 140 mt due to the cap in production in Karnataka, ban in Goa and strict enforcement of environmental regulations in Odisha. However, the domestic steel industry requirement is more than 145 mt in the current fiscal, and the industry is forced to import iron ore, which is not economically viable,” Sajjan Jindal, chairman and managing director, JSW Steel Ltd, said in a recent representation to the prime minister. According to the ministry of steel, Indian steel mills require around 500 mt of iron ore per annum by 2025, when the steel production is estimated to touch 300 mt per annum.

In Karnataka, subsequent to the order of the Supreme Court for opening of mines, the iron ore supply is not yet normalised. Of 57 mines as approved by the Central Empowered Committee, only 14 mines are operating, with an annual production rate of 13.77 mt against the total annual demand of 32-35 mt.