After losing its status as the third-largest exporter of iron ore a couple of years ago, India is likely to turn a big importer of the key steel-making raw material by the end of this financial year. The country is likely to import 10 million tonnes (mt) in FY15, three times its previous record, 3 mt, in 2012-13.
Unstable domestic production, increase in royalty rates and lower prices in the global market would contribute towards increasing imports. Domestic production has been steadily declining from a high of 220 mt in 2009-10 to 150 mt in FY14.
Companies that will import iron ore or pellets are JSW Steel, Tata Steel and Bhushan Steel. JSW Steel, which has already announced its plans of importing 6 mt in FY15, is considering options to increase it further, two officials said.
Tata Steel, facing difficulty in the production of ore at its captive mines, has imported 1.5 mt in the first four months of the current financial year. It is likely to import more. Bhushan Steel has imported pellets.
"The advantage for India is it has large resources. But given the current developments in the mining sector, the production is at lower levels. We are importing because of lower prices. But it is not feasible to keep importing in the long run," said Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel.
The domestic production continues to be uncertain given the slow pace of reopening of mines in Karnataka and Goa. In Odisha, of 26 mines ordered for closure by the Supreme Court, eight have managed to get permission to restart. In Jharkhand, the production is likely to be lower than a year ago’s. "Under the current circumstances, it is viable to import iron ore," said Ritesh Shah, lead analyst (India materials) at Espirito Santo Securities, an investment banking and securities firm.
The consumption of imported ore has its benefits for steel mills. The ore has less alumina and silica, so the consumption of coke and fuel is less, leading to 20 per cent higher recovery of steel, said Basant Poddar, vice-chairman, Federation of Indian Mineral Industries. He said for this, the steel sector might increase imports. Spot prices are $90 a tonne and analysts say these will go down $5-10 a tonne by January. This is largely due to the slowdown in demand in China.
The Chinese steel mills have started importing through their joint ventures from Australia, which has put pressure on the prices, said Prakash Duvvuri, head of research at OreTeam Research, Delhi-based iron ore research firm.
Vinod Nowal, deputy managing director at JSW Steel, said the company has to pay an additional cost of Rs 2,000 a tonne for imported ore compared to the domestic ore. "Though we have to pay more for the imported ore, the recovery of steel is higher because the ore contains 64 per cent Fe and very less amount of impurities like 1 per cent silica compared to 4-5 per cent in the domestic ore. The alumina is also less in imported ore," he said.