India’s Supreme Court order temporarily shutting down almost half of the iron-ore-producing mines in Odisha, which was issued last Friday, was expected to trigger a sharp rise in imports of the resource, reversing the current falling trend.
The Supreme Court order closing down 26 mines across the province followed its previous verdict that mines under ‘deemed second or subsequent renewal’ had been operating illegally.
The closure of the mines would bring down iron-ore production from Odisha by about 40-million tonnes a year. The court order would entail a halt in operations of six of Tata Steel's mines, two of Steel Authority of India Limited (SAIL), two of Orissa Mining Corporation and one of Aditya Birla Group subsidiary, Essel Mining.
In 2013/14, the eastern Indian coastal province produced an estimated 70-million tonnes of iron-ore from 56 operational mines.
According to Tata Steel and Federation of Indian Mineral Industries, the court order would seriously impact supply of raw material for the steel industry, both in terms of availability and prices, with several steel plants in the province dependent on iron-ore from the region forced to resort to high-cost imports of iron-ore.
The fall in domestic supplies and forced import dependency would also reverse the current falling trend in iron-ore imports.
During 2013/14 Indian imports of iron-ore fell to a five-year low at 420 000 t, down 86% over the previous year when imports had touched 3.05-million tonnes.
Over the last one year, higher availability from domestic mines and steadily falling international prices had resulted in an average $11/t fall in the local price of iron-ore lumps and a $6/t average fall in the local price of high-grade fines (iron content 63.5% and above).
However, according to FIMI, the trend would be reversed following the closure of mines in Odisha.
According to analysts, Tata Steel and SAIL, two of the country’s largest steel producers, would be most impacted by the mines closure. Tata Steel would have one lease still valid in the province, which would produce a maximum of 1.2-million tonnes a year, while SAIL would have two valid leases with maximum production capacity of 3-million tonnes a year.
Tata Steel, with domestic production capacity of about 10-million tonnes a year, sourced an estimated 75% of its ore requirement from captive mines in Odisha. While no information was available of the company’s existing inventory of the raw material, analysts said that the steel producer would have to source ore from open market auctions within the country and also resort to imports.
To curb illegal mining, the Supreme Court imposed a ban on mining in the southern province of Karnataka and in Goa, on the western coast. The ban on mining in these two regions slashed Indian iron-ore exports by 85% pushing India down to tenth slot from third on the list of the largest ore-exporting countries.
The court lifted the ban on mining in Goa on April 22, following a similar move in Karnataka earlier. But mining operations in these two producing regions were yet to get back on the rails.
Source:- miningweekly.com
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