Steel companies staying off Karnataka’s ‘overpriced’ ore

24-December-2018

Supplies dry up as NMDC halts mining over 80% royalty fiat

Steel companies in Karnataka have urged miners and the State government to price iron ore inventory on the basis of ‘value-in-use’ rather than pegging to prices prevailing in other States.

The Karnataka Iron and Steel Manufacturers Association has said the inventory pile-up of about two million tonne of low-grade iron ore in the State was the result of over-pricing, given the low iron content.

Supply shortage

There has been a huge shortage of iron ore in the State after NMDC stopped supply from the Donimalai mine following the government’s decision to enhance the premium to 80 per cent on lease renewal of the mine to the public sector mining major, it said. The State government and miners recently appealed to the Centre to allow iron ore exports so that the inventory can be cleared.

JSW Steel, one of the largest steel companies with 12 million tonnes per annum capacity at Vijayanagar in Karnataka, has been importing iron ore from Australia and blending it with supplies from Odisha and Chhattisgarh.

Seshagiri Rao, Joint Managing Director, JSW Steel, told BusinessLine that it is cheaper to import iron ore from Australia than buying it from the State if one considers ‘value-to-use’ pricing model. Depending on the alumina content in the ore, globally miners give up to $20 a tonne discount. But in India the ore is hardly priced on quality and even if it is done the quality delivered is suspect, he added.

Many of the small sponge iron ore manufacturers have already shut shop or are on the verge of closing down their business due to iron ore shortage in the State, he said.

NMDC suit against govt

Meanwhile, NMDC has filed a case in Karnataka High Court against the State government claiming 80 per cent share of revenue from the sale of iron ore from the Donimalai mine. The matter is posted for hearing on January 10.

NMDC should price the Donimalai iron ore so high that it should cover the cost and make some profit after paying 80 per cent of the revenue to the State government, said an analyst. The huge premium assigned for renewing the Donimalai mine lease to NMDC comes even as the State government has enriched its coffers through royalty collection and miners’ contribution to District Mineral Foundation, he added.

Source: THE HINDU BUSINESSLINE