Although the Supreme Court has lifted the ban on iron ore exports from Karnataka, mining firms in the state may not be able to clear the huge pile of ore immediately due to the price crash, high export duty and issues at the port. The price for ore in the international market has already declined due to increased domestic ore production in China and slackness in ore imports by Japan.
Talking to FE, Basant Poddar, managing director of Karnataka-based Mineral Enterprises (MEL), said the iron ore price has declined to $140 per tonne (f.o.b Mangalore port) from $170 tonne a month ago, as China increased its domestic iron ore production. Further, around 85 million tonne of iron ore is piled up in various Chinese ports. The industry expect the price to further fall by another $30 in the next two months. China is the prime buyer of iron ore from India. MEL was one of the petitioners that moved SC against the ban.
The price crash was also due to the natural calamities in Japan, where the import and export activities have come to a standstill. Japan was importing ore mainly from Australia and Brazil. Now Japan has almost stopped its ore import, leading to price crash in the international market.
Poddar said around 5-6 million tonne of iron ore had piled up in Karnataka’s mining region, primarily in Bellary district, when the export ban was in place. This stock consisted of primarily fines, which has no demand in the domestic market and can be sold only in the international market. The clearing of stocks should happen before the commencement of south-west monsoon, which starts in June, because ports such as Karwar, Belikeri and Goa will not handle iron ore fines during monsoon and the exporters should depend on Mangalore, Krishnapattinam and Ennore ports. He said the mining companies will start functioning only after disposing of accumulated stocks. In this background, he said it would take another 4-5 months for them to start mining again.
Around 70 mining companies are involved in mining in Karnataka, of which around 10 firms are completely Export Oriented Units (EOUs). ?Lifting of the ban is good news, but the union government should consider rolling back the excise duty too,? he added.
DV Pichamuthu, director, southern region, Federation of Indian Mineral Industries (FIMI), said the government has increased its export duty to 20% on all forms of iron ore. Earlier it was 5% for fines and 15% for lumps. Unless they roll back back it, he said the mining firms will face problems at the time when ore prices in the international market has started to decline. FIMI has already appealed to the Union finance ministry to cut down the duty. If the duty is rolled back, he said the piled up stocks can be cleared with some profits.
He said Karnataka per month was producing around 3.5 million tonne of iron ore, of which 2.5 million used to be shipped outside the country. During the ban, the industry was mining only 1 million tonne for the domestic market.