The shortage of iron ore lumps and pellets as well as increase in their prices in domestic market due to closure of 26 mines in Odisha, following the Supreme Court ban, is likely to result in the import of the raw material.
Steel mills might import the raw material in the next four-six weeks, if the domestic prices shoot up by another Rs 500 a tonne. Already, prices of pellets have shot up 10-12 per cent in the last few days. Currently, pellets are sold at Rs 7,200 per tonne (ex-factory) in eastern India, as against Rs 6,500 a tonne about 10 days ago — showing an increase of 11 per cent.
“If the prices of pellets move up by another Rs 500 per tonne in the domestic market, steel and sponge iron units might think of importing. Steel majors such as Tata Steel and Bhushan Steel are among those who might go for imports,” industry sources said.
The recent apex court court, banning production by 26 mines in Odisha, has resulted in the shortage of iron ore. About 40 million tonnes of iron ore would go out of the market. Taking advantage of the shortage, many miners have stopped selling their material and waiting for the prices to rise further. According to industry estimates, barely two-three million tonnes of pellets are available in the market in the eastern sector. The miners are holding about seven-eight million tonnes of iron ore fines in Odisha, sources said.
“The calculation at this moment on the basis of the currency conversion rate of 58.5 against a dollar and spot pellets (from global suppliers) nearing $120 a tonne CFR (65 per cent Fe pellets), the scenario is slowly swinging towards import possibilities,” said Prakash Duvvuri, head of research at Delhi-based OreTeam Research.
Some of the domestic steel mills have already started discussions with overseas suppliers and would firm up their import plans in the next four-six weeks depending on the prices, he said.
In 2012-13, Indian steel mills imported the highest ever 3.05 million tonnes of key steel-making raw material. Last year, the imports declined significantly to just about half-a-million tonne due to better availability and lower domestic prices.
For 2014-15, the scenario is still developing and the extent of overall imports would depend on how much time would the government of Odisha will take to renew the mining leases.