With Indian Mining Ban Lifted, Chinese Steel Companies Still Worried

Even Sesa Goa, with a sanctioned capacity of 6 million tons per year, has only been allowed to mine 2.3 million tons per year — not even half its capacity.

The hit to mining companies has been so severe that even export figures have taken a tumble.

Federation of Indian Mineral Industries officials have even said export of iron ore was no longer a viable proposition. With the ban on mining in Karnataka, restriction on mining in Odisha and Goa, along with a high railway freight rate and 30-percent export duty, companies are backing away from exporting iron ore because of thin margins.

In Odisha, India’s largest producer and second-biggest iron ore exporting state, there is Joda, the largest mining circle in India in terms of iron ore production, with more than 40 million tons of annual output. Joda accounts for one-fourth of India’s total output.

It was reported in some newspapers here that in the first quarter of the current financial year, traders in the Joda mining circle had lifted 57 percent less iron ore for export purposes compared with a year ago. For 2012-13, the state steel and mines department had capped iron ore production for the Joda mining circle at 40 million tons, which was another reason for the downturn in its exports.

Chinese steel companies, which rely on India, especially the ore from Joda, are worried about the reduction in supplies. India recently raised export duties from 15 percent on lumps and 5 percent on fines to 20 percent across the board. India is the 3rd largest exporter to China after Australia and Brazil.

On the domestic front, iron ore, steel and pig iron companies in Karnataka, who depend on this raw material, are facing closure due to ‘severe shortage’ of the ore, with most reporting only 45 days of stock. Karnataka’s state’s steel industry accounts for 25 percent of India’s annual production.

by Sohrab Darabshaw