Iron Ore Production Dips In India, Prices May Keep Steady

Indian steel companies are likely to start importing iron ore pellets to meet their raw material requirement for their plants as domestic iron ore production is declining, reports Business Standard.

According to the report, the iron ore output in India’s top producing eastern state Odisha has slipped by 18 percent. The report further stated that the iron ore production in the state came down by nearly one-fifth to 60 million metric tons during 2011-12 against 73 million tons reported in the previous financial year.

Odisha produced about 75 million tons in 2010-11, a third of the country’s annual output of about 218 million tons. Production in key Indian states is already down and the country has produced only 208 million tons of the iron ore in 2010-11 compared with 218.5 million tons in 2009-10.

The Business Standard report says that domestic steel plans are also facing supply problems of iron ore lumps and some manufacturers have started buying pellet from overseas countries. According to the report, Bhushan Steel imported 55,000 tons of iron ore pellets from Brazil. The company is also waiting for another 23,091 tons of pellet within the week.

The shortage of iron ore started after a decision by the Supreme Court of India last August in the southern state of Karnataka. The Court had banned mining operations in Karnataka following the recommendations of the Central Empowered Committee. However, in April this year, the court partially lifted the ban and it is believed that iron ore production by privately owned miners in Karnataka will likely resume by July 2012.

Karnataka accounts for a quarter of India’s iron ore output. The state produces 16 million tons of iron and steel in a year, which is a little less than 25 percent of the country’s total production. Until last year, India had an iron ore surplus reversed, but now the country has slipped into deficit. Recently, India has also registered a decrease in export of iron ore. India, the third-largest global exporter of iron ore in the world, had exported 117.3 million tons in 2009-10.

The exports had dipped by over 36 percent to 56 million tons in the April-February period last fiscal year against the prior year. India’s federal government had hiked the export duty on iron ore to 30 percent in December last year from 20 percent, while freight on iron ore for domestic consumption was increased by 20 percent early in March and the rates were reduced by 16 percent on its exports.

Meanwhile, reports suggest that iron ore prices in the international markets are likely to remain subdued in the next three months on the back of slowing Chinese demand. Prices of iron ore, which have fallen by close to 20 percent in the last month alone, however, may get some support from buying by domestic steel mills. According to World Steel Association data, in May, iron ore prices witnessed a significant drop, as steel output in China declined 1.6 percent to 60.6 million tons in April.

by TC Malhotra