With Karnataka iron ore miners unable to clear stocks, the Federation of Indian Mineral Industries (FIMI), has informed the Commerce Ministry of having approached the Supreme Court for permission to export ore pellets, as capacities are operating at sub-optimum levels.
The mining industry's apex body, via a letter to the Ministry, informed that purchasers of ore should utilise the commodity produced in Karnataka before procuring from outside the state or importing. It also wanted ore imports to be discouraged, claiming that they are a strain on Gross Domestic Product (GDP), are carbon negative and lead to foreign exchange outflow.
“The capacity utilisation of Karnataka's pellet producers has fallen to 60 per cent from 100 per cent earlier, which makes this industry operate in losses. It is difficult for them to operate in such a business climate,” Noor Ahmed, one of the miners in Karnataka, and an ex-FIMI official, told Business Standard.
Early this month, NMDC Limited, the state-controlled mineral producer, reduced iron ore prices by Rs 300 a tonne in Karnataka due to increasing stocks.
The miner had raised the price of lump ore in May by Rs 150 to Rs 3,050 a tonne.
“We have started lifting a small portion of iron ore from Karnataka after NMDC reduced prices, but the reduction is not enough,” sources at JSW Steel said. “There is still a gap of Rs 300-400 per tonne between Karnataka and Odisha ore. Given the price of the ore for the quality it is, we cannot lift big quantities from Karnataka like before,” said the source.
Sajjan Jindal-led JSW Steel is the largest buyer of Karnataka ore and it lifts about 60-70 per cent of the produced mineral to cater to its 12-million-tonne plant at Vijaynagar.
Kalyani Steel and Kirloskars are some of the smaller steel manufacturers in Karnataka state that lift the auctioned ore.
In December last year, the Supreme Court raised the iron ore output cap in Karnataka to 35 million tonnes from the 30 million tonnes it had imposed in 2011. The ruling was aimed at helping steel mills across Karnataka receive more raw material and raise operating capacity.
Currently, the entire ore quantity produced in the state is only allowed to participate in the state's e-auction process. Moreover, iron ore purchased by pelletisation plants cannot be sold outside the state. This puts other states at an advantage, as they can sell outside their territories. Also, the ore produced has to be sold only to a restricted group of purchasers, which excludes traders, while consumers of Karnataka have the freedom to choose the seller, who could be from another state or even a foreign party.
India has three major iron ore regions --Odisha, Chhattisgarh and Karnataka. Iron ore is the key raw material used in the making of steel.