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Iron ore prices are unlikely to fall in the near future in the aftermath of Supreme Court's judgement to allow 50-odd Category-B mines in Karnataka to start operations after fulfilling all procedures.
According to industry sources and analysts, the Supreme Court's judgment will add to supplies of this key raw material for the steel industry in Karnataka. But its impact on prices in this financial year may not be much.
Iron ore prices have been falling lately with the country's largest player, NMDC, cutting prices. Its last cut was in early April. Odisha Mining Development Corporation (OMDC) has also cut prices. Both took cues from falling global prices - prices of high-grade ore slid from $150 a tonne in January to $139 a tonne in March. Substantial extra iron ore capacities are also expected to be added in a year's time, which will keep prices under check.
Karnataka requires nearly 35 million tonnes (mt) of iron ore annually. NMDC produces 10 mt in the state, which is sold through auction. It is expected to continue selling ore even after more mines start operations.
Category-A mines were allowed to start operations in the last financial year, but their production began only last month. With Category-B mines, production is likely to start this year, the state's total production in FY14 is expected to be around 20 million tonnes.
"2014-15 will see a real turnaround in ore production in Karnataka," said an analyst with a foreign brokerage covering iron ore.
According to R K Sharma, secretary-general, Federation of Indian Mineral Industries, even mines that have been allowed to start operations will take several months before they actually start production. This is because they remain closed for the past two years and now "they will have to take several permissions".
At present, steel mills in the state are procuring ore from other states and some of the mills in western coasts are importing ore. Over the past six months, mills are estimated to have imported two mt of ore.
Jayant Roy, senior vice-president, Icra, a New Delhi-based rating agency, said, "It is too early to say how the judgment will help moderating prices as ore shortage in Karnataka will persist in the immediate future and will remain so till mining operations in these mines are resumed."
