Steel companies import more Ore despite big pileup in Karnataka

10-December-2018

Karnataka iron ore producers are sitting on around 5.5 million tonnes of idle iron ore capacity despite state-run NMDC temporarily closing its Donimalai mine due to increasing imports by steel players, industry insiders said, denying any scarcity of the mineral.

Rising imports have even forced NMDC, the country’s largest iron ore producer, to cut prices as it led to a piling up of the mineral in the state, they said.

Without naming JSW Steel, which has Karnataka’s largest steel plant of 12 mt annual capacity in Vijayanagar, a senior executive of a natural resources major accused “a major steel player in Vijayanagar” of importing at a time when about 6 mt of iron ore remains unsold in the state, allegedly spending more in the short term but depressing prices in the long run.

Sales of NMDC, formerly National Mineral Development Corporation, in Karnataka had started dipping from April, and the state run miner cut the price of lump iron ore by ?300 per tonne in December and that for fines by ?200 per tonne.

The price cut was in line with a global softening of iron ore prices from $74/tonne to $64/tonne following a fall in steel prices. Domestic steel players have cut prices of hot rolled steel coils by ?1,500 per tonne.

To be sure, on a net level, NMDC had increased average price of iron ore by ?500 per tonne between April and December.

“If the current level of import is not curbed, this will create a glut like situation in the state,” said the executive cited earlier.

JSW Steel’s Vijayanagar plant has annual requirement of 22 mt of iron ore. It had plans to import 4 mt in the current financial year from Australia.

A person close to the company said the higher cost of imports does not impact the company in any way because it gets a higher grade of iron ore that cuts down costs on other processes like ore beneficiation, a process adopted to improve the grade of iron ore.

The person also countered the charge that JSW Steel was importing even as there was a glut in the state, saying the company often has to source iron ore from Odisha and abroad due to chronic shortage of the mineral in the state. If JSW Steel were to source its entire requirement from the state that would leave little for other customers, the person said.

NMDC had temporarily suspended mining at its Donimalai mine in November after a dispute with the state government, which wanted to impose an additional 80% levy on the sales from the mine, reached a stalemate.

Iron ore producers denied any scarcity situation due to the closure of the Donimalai mine.

According to data by Pellet Manufacturers Association of India, iron ore imports are projected to touch 15 mt by the end of this fiscal year, 60% higher than the import level of last year. Up till July, iron ore imports had touched 1.6 mt, 33% rise from the same time last year.

Source: THE ECONOMIC TIMES