The severe shortage in iron ore supplies from Karnataka and Goa, where mining was stopped following a Supreme Court directive, and the cap on production in Odisha have led to India becoming a net importer of iron ore this financial year.
Till 2011, India was the third-largest exporter of iron ore.
According to industry sources, between April and December 2012, India imported an estimated six-seven million tonnes (mt) of iron ore. Some steel mills such as JSW Ispat, Bhushan Steel and Essar Steel have been importing ore for their port-based steel plants. JSW Ispat has also used imported iron ore for its plant in Salem and is considering importing the commodity for its plant in Bellary, too.
An export duty of 30 per cent, coupled with the Railways’ high freight rates on iron ore exports, also led to the sharp fall in exports.
According to the Federation of Indian Mineral Industries (FIMI), India’s iron ore exports fell 62.3 per cent to 15.05 mt in the April-November period, against 39.95 mt in the corresponding period of the previous year. Since November, no iron ore exports from India were recorded.
The steel industry expects the availability of iron ore to fall further in the next financial year (2013-14), owing to several constraints in many iron ore-producing states.
While the Supreme Court has allowed Category A mines in Karnataka to resume mining, only four mines have done so in the last few days. So far, these mines have produced about one mt of ore, which has been put up for auction.
State-owned National Mineral Development Corp (NMDC), which has been allowed to produce one mt a month from its Karnataka mines, is able to produce only about 7,00,000 tonnes due to logistical bottlenecks.
FIMI estimates production in Karnataka during 2013-14 at about 15 mt, assuming more mines in Category A and B resume mining. The estimated production would include about eight mt from NMDC.
All steel mills operating in India might have to either import iron ore or shut operations. According to Barclays Research, during FY12-FY15, India’s iron ore production is likely to decline at a compounded annual rate of 3.8 per cent, even as demand is set to increase eight per cent.
The Odisha government has capped iron ore production at 52 mt. For miners whose leases are pending for renewal, capacity has been restricted to meeting only their captive requirements.
In Goa, resumption of mining depends on a directive from the Supreme Court. Once the mining ban was lifted, production was likely to be capped at 25 mt, Barclays Research said.