By Our Correspondent
BHUBANESWAR/NEW DELHI: With All India Induction Furnaces Association (AIIFA), the Indian Steel Association (ISA) and the Federation of Indian Mineral Industries (FIMI) knocking the doors of Prime Minister’s Office, the Dharmendra Pradhan led Union Steel Ministry may go for a short term ban on iron ore exports if things not come to normal over supply of raw materials for domestic needs.
As against 123.8MT iron ore produced in Odisha from January to November 2019 total production in the same period in current year has been only 98.2MT. Out of the recently auctioned 24 mines, only 5 have been able to start production and dispatch till date, leading to shortfall of supply. Only 5 have so far started operations while rest keeping quite. Jajang, Nuagaon, Narayanposhi, Ganua iron ore mines of the JSW Steel Limited, Thakurani iron ore mine of M/s Arcelor Mittal have started operations but others yet to resume operations
Highly placed sources in Ministry of Steel in New Delhi, however maintained that the Ministry is holding discussions with various concerned stakeholders. In fact, the ministry has already spoken to the Odisha Minerals Development Company (OMDC) on the supply issue. It is considering all possibilities, including a short-term ban on exports. The Minister Pradhan had also urged State governments to initiate some process in form of a policy framework to avoid supply chain disruptions.
Industry associations, representing both secondary and primary steel makers—have been demanding for a ban on iron ore exports. Over April-July 2020, India’s exports of iron ore have risen by a massive 63%. This rise in exports is primarily fuelled by record steel production by the world’s largest steel manufacturer—China.
India’s iron ore production over April-September 2020 stood at 47 million tonnes, witnessing a drop of about 50% versus last year. Also, about 50% of the mines auctioned in Odisha this year went to large steel players for captive usage while majority of the remainder, which have gone to merchant miners, are yet to start production. An industry estimate suggests that over April-September 2020, only 4.06 million tonnes of ore was produced from the auctioned mines. However, 93% of this production was done by JSW and Mittal for captive consumption. The mines were supposed to produce over 24 million tonnes during the period.
Only 12 merchant mines in Odisha are currently operational, while at least 20 are closed and all 11 merchant mines in Jharkhand continue to remain shut. This has caused a serious shortage of the raw material for the smaller steel producers in India’s domestic market. Due to this supply crunch, iron ore and pellet prices shot up by about 40% for six months starting March 2020. The Odisha Mining Corporation (OMC) continues to be a beacon in these gloomy times, bringing relief to secondary steel producers by supplying the ore, albeit at higher than normal prices. Normalcy in prices and supply is expected to return in Q4FY21 and early quarters of 2022 when (hopefully) the vaccine starts getting administered to the masses.
FIMI said No mining lease holder would like to export if there is a domestic buyer. Currently, what is being exported is what is not being sought by domestic steel mills.Since iron ore is produced in surplus in the nation, pellet producers and steel manufacturers choose to buy only grades with above 62% Fe content. There is export duty on exports of iron ore +58% Fe and if domestic producers are ready to purchase this iron ore, there would be no need to export.
Sources said iron ore stocks lying across mine-heads soared to 162 million tonnes during 2018-19, from 151.44 million tonnes in 2017-18. The rise has been constant over the past few years. Consequently, miners including the NMDC have been exporting the iron ore owing to higher realisation for their produce. The signs were already visible in FY20 as India’s iron exports rose 133% to 37.69 million tonnes versus FY19 levels. And over 80% of these exports went to China. In crux, India’s domestically produced iron ore was serving the needs of another market before catering to its own.
Meanwhile, the Odisha government’s proposal to penalise the auctioned mines for their failure to meet MDPA commitments could if actually implemented, bring relief to many steel-makers dependent on Odisha’s iron ore. This may increase iron ore supplies in the state in the coming months.
Many new leaseholders, who had bagged the rights to operate mines in Odisha in January 2020, had been show-caused in August and September this year for not producing ore as per minimum production requirement. The Odiha Directorate of Mines, has now sought departmental approval to slap them with penalties, charged at 24% of average sale price, as published by IBM, on their monthly shortfall in despatch, which is to be appropriated from their respective performance security.
Those who won mining rights through auctions must produce at least 80% of the average production of an iron ore mine in the preceding two years – in the first two years of their operation. The need for such a rule under MDPA (Rule-12A of MCR, 2016) was to ensure no new leaseholder could afford to squat on precious mineral resources after bidding high premiums for mines.
The Government is considering to increase of the permissible iron ore stack size from 4,000 tonnes to 20, 000 -25,000 tonnes, nearly six times of the present stack norms. The State Government seems want to streamline dispatch movements of minerals
