Currently the iron ore scenario in the country is a little messy and murky. With banning of iron ore mining in Karnataka by court order, JSW had to drastically cut down steel production in the state, NMDC is to make available around 1 million tonne per month from its own mines and the sale of inventories through e-auction has been found to be too costly. Looking from another angle, banning is a step against illegal mining which has violated environment and forest regulations, evaded payment of taxes and duties, made a mockery of labour laws and got the most out of a unholy nexus between state administration, political parties and the owners leading to mounting loss of revenue. The latest example relates to the cancellation of the green clearance given to Pirna iron ore mines of Sesa Goa for suppressing information and faulty environment impact assessment.
Also it is to be appreciated that the high differential that exists between the cost of mining and the prices charged by the miners has led to mining of iron ore becoming one of the most profitable ventures and therefore the envy of steel and sponge iron industry. The worrying part of the story is the probable extension of the banning to other ore producing states like Goa, Odisha and Chattisgarh. This would result in the embargo on inter-state movement of the consignment, currently being resorted to by steel and sponge iron units even at a higher cost.
Exports of iron ore from India to China are coming down due to Karnataka issue. As demand for iron ore is marginally subdued due to cut in production announced by major global players, the shortfall in supply from India may be filled up by BHP, Vale or Rio Tinto, thereby preventing any rise in prices of fines (63.5% Fe) from the current level of $ 180/t CFR China. The proposed hike in export tax to 30% by ministry of steel may not come through immediately under the current political impasse. Reduced availability of steel would lead to rise in steel prices, more in long (to take care of reasonably good demand from construction) and less in flats.
Steel imports may not rise as fall in prices is neutralised by increase in exchange rate. If the banning of iron ore mining extends to other states, would the shortage in raw material prompt major steel producers to arrange imports? The situation may also lead to revisiting the issue of utilisation of the captive mines and expediting investment in them to enhance production. Iron ore scenario in the short term is therefore poised for many surprises.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal