Iron ore production headed for all-time low

The ripple effect of SC's move to temporarily restrict the operations of 26 mines in Odisha will be felt all over

The Supreme Court’s move to restrict the operations of 26 mines in Odisha, albeit for a short period, will hit India’s overall iron ore production and exports this financial year.

Until the Odisha government renews the leases of these 26 mines, domestic iron ore production will fall by an estimated 40 million tonnes (mt) to an all-time low of 115 mt. Major miners, including Tata Steel, SAIL, BICO and Odisha Mining Corporation, will record lower production.

At the beginning of 2014-15, domestic iron ore production for this financial year was estimated at 155 mt. In 2013-14 and 2012-13, production stood at 136 mt each.

“With 26 mining leases going out of production, the actual production for this year in Odisha could fall to 32 mt. Of this, three mt will be from captive mines. The rest is inadequate to meet the requirements of steel mills. This means there will be very little scope left for exports from Odisha this year,” said Prakash Duvvuri, head of research, OreTeam Research, a Delhi-based research firm.

In 2013-14, Odisha produced 72 mt of iron ore, of which 15 mt were from captive mines. This financial year, production is expected to decline to 29 mt.

Duvvuri said this year, exports could stand at 20-22 mt, provided Goan miners were able to export about 15 mt to China. Last financial year, Odisha was the largest contributor to India’s iron ore exports. This year, excluding the 26 mines banned from mining, the rest could contribute five-six mt.

“This year, a pick-up in exports largely depends on resumption of mining in Goa. We are optimistic this year could be positive for exports, compared to the last two years. The miners in Goa have a cost advantage of transporting ore through rivers; they can absorb the 30 per cent export duty,” said R K Sharma, secretary-general, Federation of Indian Mineral Industries.

Duvvuri said, “The uncertainty around mining ban in Odisha will prevail for about six months or till the state government swings into action. If we compare Odisha with Karnataka or Goa, it could take longer. However, as it is expected the new government will support industry, it could be resolved early. There are indications the government of Odisha has already started the process of considering the renewal applications of mining leases on a priority basis.”