Iron ore stocks up on less offtake, export duty

Iron ore stocks are growing at mine heads, with lower offtake while output has been rising.

Data from the Indian Bureau of Mines shows the total stock of ore at end-July was 144.5 million tonnes (mt). Of this, 85 per cent had built up in Odisha, the largest producer, and Jharkhand. Around 70 per cent of the stockpile comprises ore with content below 62 per cent, both lumps and fines, the latter being 93 per cent of this.

"Production is expanding but domestic demand is not enough to absorb it. The only outlet for the piled up ore is exports. However, the high export duty of 30 per cent on higher grade ore has hampered shipment. We have been appealing to the Union government to lift this duty, as has been done for lower grade ore", said R K Sharma, secretary general, Federation of Indian Mineral Industries (Fimi).

The 30 per cent export duty was removed in the 2016-17 Union Budget for lower grade ore (iron content less than 58 per cent). This has boosted its export from Goa where is hardly any value addition. Odisha and Jharkhand, with comparatively richer ore, continue to suffer. Almost all the iron ore mines in the two states are in the hinterland, away from the ports. Non-lifting of ore had resulted in piling up of almost 84 mt at mine heads in Odisha and 38.85 mt in Jharkhand by end-July.

Fall in demand

Ore prices have risen abroad, powered mainly by China's stimulus. "With the bouncing back of prices, we have been able to recover a little more than the cost of production but the effect is nullified by the 30 per cent export duty," said an official with a standalone mining company.

In 2015-16, the country produced 156 mt of iron ore; net domestic demand was 112.4 mt. Exports were lacklustre at 4.5 mt; leading steel companies, mainly JSW Steel, imported 7.1 mt of ore in 2015-16.

Odisha's chief secretary has already written to the Union mines ministry, pleading for lifting the 30 per cent export duty, to stop the growing stockpile. Fimi has been lobbying similarly.