Odisha mines' closure may push up prices by 20%

The temporary closure of mines operating under deemed extension has also choked choked iron ore supply to steel makers

It’s a double whammy for steel industries in the country. The temporary closure of mines operating under deemed extension in Odisha has not only choked iron ore supply to steel makers across the country, it has also raised the prospect of sharp rise in its prices.

“There is an acute shortage of iron ore production in Odisha, which met nearly 60 per cent of the raw material requirement of domestic steel industries, following the apex court’s order. Going by the simple price fixation formula based on demand and supply, this is automatically going to jack up prices,” pointed out an official of a mining company not affected by the court order.

“We plan to raise our rates by about 20 per cent,” he added.

The domestic iron ore prices at the mines pithead are in the range of Rs 1,900 to Rs 2,200 per tonne for fines and Rs 3,500 to Rs 4,500 per tonne for lumpy ore, depending on the grades.

The shortage had prompted mine owners to raise prices, sources said. As a precursor to this phenomenon, private independent miners had stopped taking fresh bookings, they added.

Out of 56 working iron ore/manganese mines in the state, the court order has shut down 26 mines operating under deemed extension pending second and third renewal of their lease. About 17 of these 26 mines were standalone mines supplying ore to different steel industries across the country.

The closure of the mines has knocked off approximately 30 million tonne iron ore output capacity. While ordering closure of mines, the apex court had asked the state government to take a decision on lease renewal applications of affected miners within six months. But going by the speed with which the state government has been acting, industry and the mine owners fear it will be a long-drawn process.

Tata Steel received the biggest blow, as its seven captive mines — Joda East, Joda West, Khandbandh, Bamebari, Katamati, Manmora and Guruda — have gone off operation after the SC order. The order also means suspension of two mines of SAIL- Bolani, Barsuan-Kalta.

Other miners to be impacted are K J S Ahluwalia, K N Ram, Kalinga Mining Corporation, Kaypee Enterprises, Mideast Integrated Steel, Aryan Mining and Trading Corporation Ltd, Bonai Industrial Company Ltd, B I Company Ltd, Feegrade & Company Ltd, OMM Pvt Ltd, OMC and Rungta Mines Ltd.