Indian DRI plants face iron-ore shortage

Karnataka has sought federal government directive to the State-owned and operated largest iron-ore miner NMDC to increase volume shipments to DRI units in the region.

According to officials in Karnataka government, an estimated 75% of the 69 sponge iron manufacturing units in the region were either closed down or operating at drastically reduced capacities as a result of the shortage of iron-ore or pellets available in the open market.

This follows persistent pleas by the Karnataka Sponge Iron Manufacturers’ Association for assured supplies of raw materials.

In October last year, the association revealed hat DRI units were closing down as iron-ore miners were to not making any specific allocation of raw material to sponge iron producers, while the estimated 27-million tonnes a year of iron-oreproduction in the province was mostly taken up by integrated steel producers, leaving very little supplies for DRI units which were largely small to medium-sized companies.

DRI units in the southern province require an estimated nine-million tonnes a year of iron-ore to be able to operate at full capacity.

However, officials in Mines Ministry have been caught by surprise by the shortage of raw materials faced by DRI units, particularly at a time when India was expected to close the current fiscal year with iron-ore production at a five-year high of around 180-million tonnes.

It was pointed out by the officials that the government also made structural changes in the legal environment and liberalised auction rules that would ensure greater supply of iron-ore to DRI units, in the long term.

The officials said that, in the auction rules first framed in 2015, sponge iron units and pellet plants were disadvantaged as the rules heavily favoured large integrated steel producersin bidding for iron-ore blocks at the auctions. However, the Mines Ministry late last year tweaked the rules which now enabled provincial governments to set aside specific iron-ore blocks within their respective territories on the basis of end-use.

Under this provision, iron-ore bearing provinces were empowered to reserve iron-ore blocks for specific sectors like DRI units or pellet plants, the officials added.

Simultaneously, the Steel Ministry has scrapped the practice of categorising steel plants as integrated, secondary or major producers and brought all steel producers irrespective of sourcing of raw material, technology used or size of operation to a level playing field where uniform norms would be applicable.

However, at least two DRI plant operators pointed out that given the small size of the DRI manufacturers, they did not have the financial or managerial wherewithal to participate in competitive bidding to secure iron-ore blocks through the auction route.

Also owing to their limitations in size and financial muscle, securing raw material through e-auctions conducted by various provincial government controlled mining agencies were a challenge and bulk of volumes offered through e-auctions too were mostly bagged by large steel mills, the operators added.

Source – www.miningweekly.com