KIOCL plans to resume pellet exports this year

The company has asked railways to alter its differential tariff policy

State-owned KIOCL Ltd, a union ministry of steel undertaking, plans to restart export of iron ore pellets later this year. The company, a 100 per cent export-oriented unit, had stopped export of pellets in September 2011, owing to shortage of iron ore and differential freight charged by the Indian Railways.

“We are currently sourcing iron ore from NMDC’s Kirandul and Bacheli mines in Chhattisgarh at Rs 4,500 a  tonne. The railways have been charging distance-based charges over and above normal freight on iron ore transported for manufacture of pellets meant for export. We are working out how we can open up exports,” Malay Chatterjee, chairman and managing director, KIOCL, told Business Standard. “Once, we sort out this issue with the railways, we will restart exports.”

The company has also filed a petition in the high court here challenging the policy of the railways. KIOCL is currently selling its pellets in the domestic market. “The quality of our pellets is well known in the overseas markets and buyers are still longing for it. We want to restart exports as and when the railways lift their embargo,” Chatterjee added.

Due to the differential freight rate charged by the railways, the company is forced to pay Rs 1,600 a tonne on this.

KIOCL is known for its DR grade pellets (direct reduced pellets) and had huge demand from buyers in China. “Our DR grade pellets would easily fetch $25 a tonne higher than blast furnace grade pellets in the international markets even now,” a company official said.

At a time, when KIOCL operated its own captive mines in Chikmagalur district of Karnataka, it produced pellets from magnetite ore, which were enriched to 65-66 per cent iron from 35-40 per cent. It is currently sourcing haematitie ore from Chhattisgarh, which can be enriched by only one or two per cent, he said.

The company hopes to get the differential rate system changed within the next few months.

Prior to suspension of exports in September 2011, KIOCL had exported 536,618 tonnes of iron pellets to China against 920,171 tonnes exported to China and Australia in 2010-11, a decline of 42 per cent. At the peak of its performance, the company exported 3.7 million tonnes (mt) of pellets in 2004-05.

KIOCL’s pellet production declined 23.5 per cent to 1.3 mt in 2012-13 compared to 1.7 mt the year before.

“Presently, the pellets are priced at $135 per tonne in the international market and it would not be beneficial for us to export after paying distance-based tariff to railways. We have to wait for the prices to go up or wait for the railways to change their policy,” the company official said.

KIOCL recently signed a memorandum of understanding with Andhra Pradesh Mineral Development Corp to set up a joint venture for mining in Ananthapur district. It plans to set up a 1-mt per annum iron ore benefication and pellet plant at an investment of Rs 1,000 crore.