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India: Iron ore output may rise 10% in 2015

Even as the mining industry is facing several hurdles to secure approvals for restarting mines in Goa, Karnataka and Odisha, the domestic iron ore production is likely to see a modest 10 per cent growth in 2015.

The production, which recorded a marginal growth to touch 140 million tonnes in 2014, is expected to touch 150-155 million tonnes in 2015. This is possible as more mines to start operations in Karnataka, Goa and Odisha in the coming months.

“All the mines closed in Odisha, Goa and Karnataka are unlikely to open this year. We can expect some mines to start operations in Goa only by September. There are many challenges in all these states. In Karnataka, government approvals are limping. There may not be any big growth in the domestic production but we can hope to achieve last year’s levels or see marginal growth,” said Basant Poddar, vice president, Federation of Indian Mineral Industries (FIMI).

However, the mining industry is looking forward to some positive developments in 2015. The renewal of leases in Goa, formation of new government in Jharkhand, issuance of clearances and permits in Odisha and restarting of mines including auction of Category-C mines in Karnataka are expected in 2015.

“The worst seems to be over and rebuilding exercise is in progress. Though the capacity enhancement is happening very slowly, the production forecast for iron ore in 2015 would be definitely better and an addition of 10-15 million tonnes of iron ore through the year cannot be neglected,” said Prakash Duvvuri, Head of Research at OreTeam, a Delhi-based iron ore research firm.

Odisha and Jharkhand have been closed for nearly 5-8 months now but the major steel companies have been able to earn their mining rights from time to time. The other medium and smaller steel companies dependent on local iron ore now have MoUs with the state governments or processing their requirement from the private miners. Amidst a crawling steel demand, these plants are not feeling the heat of restricted iron ore availability, he said.

With the global prices of iron ore hitting their low in the recent months, the steel industry is likely to continue their imports in 2015. JSW Steel and Tata Steel are major importers. Though JSW imported the majority volume in 2014, Tata Steel was a silent player with nearly 2.5 million tonnes of imports through the year.

“In 2015, India is likely to completely vanish from the export market as the prices have been very low. Unless the government withdraws export duties at least on low-grade iron ore, we cannot export from India anymore,” Poddar added.

In addition to Tata Steel and JSW Steel, other smaller mills like Kalyani Steel are actively considering the import of iron ore. “We are continuously evaluating the possibility of imports this year. The landed cost of imported ore and Odisha material is almost same. Once we are sure of better quality in imported ore, we will start importing,” said R K Goyal, Managing Director, Kalyani Steel.

Comparing the domestic situation with the export scenario, it is more beneficial for the miners to sell iron ore in the domestic market and make good profits, Duvvuri said.

Indian iron ore at Rs 3,500 per tonne (63% ex-mines) in Odisha versus, global price of $65 per tonne (Rs 4,000) has made it almost impossible for short term importers to purchase it. Only the big producers or those plants which are based on the port are in the position to import the material and use at the prevailing costs.

Though Karnataka and Goa have been shut for quite some time, the year 2014 witnessed even the major producing states like Odisha and Jharkhand shutting down.
Source: Business Standard