Iron ore resources may see 30% jump, to come as huge boost for steel sector

Written by Rajat Guha | New Delhi | Updated: Jun 30 2012, 07:57am hrs
India's resource base for iron ore is expected to see a quantum jump of over 30% in next few years, bringing much-needed relief to the steel sector that feared that India could soon become net importer of ore to meet the rising demand from the industry.

The government proposes to reduce the threshold limit of iron content in ore deposits from the current 55% to 45%. Once implemented, this would unlock large resource areas in the country where no mining was being undertaken so far due to below-par quality of ore. The issue has been highlighted in the draft new steel policy set to be finalised by July-end.

"Our estimate is that the new classification may add up between 5-10 billion tonne of additional iron ore resource in the country. Though at 45%, the ore quality will of of low grade, the same could be used by the steel industry through the process of beneficiation and pelletisation," said a mines ministry official asking not to be named.

The Geological Survey of India the principal agency for geological mapping and regional mineral resource assessment of the country has already been entrusted with the work to reassess the resource base in the country as a result reduction in the threshold limit.

This is ag ood development as mining lower grades of ore will enhance availability of the key raw material for the steel sector. This has been done successfully inn several other countries, said Federation of Indian Mineral Industries secretary general R K Sharma. The country currently has iron ore resource base of close to 30 billion tonne with about 18 billion tonne of haematite ore used by the steel industry and another 10-12 billion tonne of magnetite ore which largely remain unused as it requires special process for being used in steel making.

As per mining industry estimates, the current iron ore resources is expected to last for next 75-85 years as steel production reaches 200 million tonne (MT) by 2020. The steel ministry estimates, however, puts the deadline much earlier at 35-40 years. This has forced the government to look at enhancing resource base in the country as India could become net importer of ore ion next few years from being an exporter if steel production continued to grow over 7-8% over next few years.

One million tonne of steel requires 1.6 million tonne of iron ore. With steel production slated to grow to 200 mt by 2020, ore requirement would be 360 mt much more than present production of 198 million tonne per annum (2011-12). While India exports almost half of the ore it produces currently, there is decline in this trend with rise in domestic demand for steel. Against exports of around 98 mt in 2010-11, ore exports has fallen to 60 mt in 2011-12.

Under the draft new steel policy, it has also been decided by the steel ministry that demand forecast for steel production would only be done for 10-12 years as against current practice of 40 years. The ministry is of the view that projections over such a long period may not be realistic and at best be considered as indicative in nature.

The ministry is also of the opinion that steel plants should be set up near the sea coast , as cost of importation of coking coal can be minimized as, cost of importation of coking coal can be minimised. Also, the cost of transportation through the sea route for other raw material is much less than that of inland surface transportation.