Orissa ore ban, high prices put Jharkhand DRI units in the dock

Orissa?s crackdown on illegal iron ore mining since December 2009 has pushed most sponge iron (DRI) plants in Jharkhand into dire straits.

?There?s hardly any iron ore coming from Orissa now; we are buying whatever we are getting; in most cases it is the inferior grades as also iron ore fines,? said a medium-scale sponge iron manufacturer here, badly hit by the shortage.

Following administrative action by the Orissa government at the railway sidings of iron-ore rich Keonjhar district, arrival of iron ore and other minerals into Jharkhand through railway rakes have stopped completely.

?It is only coming by road and that too of sub-standard quality,? claimed another sponge iron producer.

Again, the recent arrest of some transporters has further affected movement of iron ore even by road.

The difficulty with most small sponge iron producers in Jharkhand is that they need to buy their basic inputs, both iron ore and coal, at an ?affordable price? in order to stay in competition with every other player selling sponge iron to induction furnace owners and others.

Most sponge iron (DRI) producers in Jharkhand dependant on iron ore from Orissa said supplies from Orissa had helped keep iron ore prices at an ?affordable level?.

Thus, even though there happens to be a couple of mining companies in Jharkhand who also supply iron ore to interested parties within the state, most small and medium-scale DRI manufacturers in Jharkhand stay away from them as their economics does not work well with the prices such suppliers have been found to be quoting.

?A truck-load (from Orissa) of medium quality iron ore, which a couple of months ago was costing around Rs 5,000, was today available somewhere between Rs 7,000 and Rs 7,500,? said Kohinoor Steel?s Avinash Dugar.

Kohinoor Steel?s 400-tonne per day (tpd) sponge iron plant here, when running at full capacity, requires 600 tonne of iron ore daily.

Owing to the severe shortage of supply of iron ore as also the abnormally high price at which it was being available today, most sponge iron units still operational in Jharkhand have been forced to bring down their plant output to around 40%-50% of their rated capacity.

Said Siddhi Vinayak Metcom (SVM) managing director Guddu Singh, ?The situation is pretty tough and grim. We are banking on old stocks as also using fines which generally get accumulated at the stockyards during rains.”

SVM which has two units of 100 tpd each at Chowka, 35 km from here, is currently producing only around 60-70 tpd of sponge iron per day.

?A couple of months ago we used to buy the low grades of iron ore at Rs 1,500-1,600 a tonne, which today is available at almost double that (price), and even at that price there is no availability,? added Singh.

Again, though Orissa has called a meeting of mine owners, state government officials and others involved in mining operations in the state in the next couple of days, knowledgeable sponge iron producers here say that the outcome, even if positive for the mine owners, would not soften iron ore prices in the near future, especially as monsoon was round the corner.

?From mid-June we would have monsoons; the iron ore mines would be inundated which would make mining more difficult, which in turn would badly affect both output and prices; it will be monopoly again for the mine owners,? said the SVM managing director.

Historically speaking, most sponge iron plants started coming up in Jharkhand from around 2004-05 when the then BJP-led Arjun Munda government went on a MoU-signing spree.

Having signed an MoU with the Jharkhand government for setting up a sponge iron plant gave the owners confidence enough to go ahead and invest in the unit with the hope that they would one day be allotted an iron ore mine in the state.

This has not yet happened yet, even while some sponge iron producers like Kohinoor Steel, Adhunik Alloys & Power Ltd, Ispat Industries Ltd, Monnet Ispat & Energy Ltd and Abhijeet Industries Ltd have already gone to court for allotment of an iron ore mine, alleging that the state government had gone back on its promises made in their MoUs.