Online Iron Ore Supply - How Much And When?

Whatever the final figure of new iron ore supply due online, there’s no doubt that it will boost the overall steel production capacity of Karnataka. The total iron ore requirement of Karnataka itself is approximately 40 million tons a year, but the court had capped the maximum production at 30 million tons.

Steel producers say the Supreme Court’s order was well-times, as the Indian economy was expected to return to growth mode. The optimistic folks said it would greatly reduce India’s recent dependence on ore imports.

According to a report in The Economic Times, the Federation of Indian Mineral Industries was of the opinion that even after Supreme Court authorization, iron ore availability would ease only partially as mining companies would find it difficult to comply with the regulatory norms.

In the group’s opinion, an additional 10 million tons will be available in the immediate future. But the steel industry agreed that iron ore supply, as well as its quality, would improve, pushing prices down.

Kalyani Steel’s Managing Director R.K. Goyal said it would take up to two years for all the mines to come on stream. He felt no more than 24 million tons would be available.

Another report in the Business Standard noted that for companies such as JSW Steel, which were underutilizing their steel manufacturing capacity due to lack of iron ore availability, the court ruling would come as a breather. JSW is the largest steel producer in Karnataka.

Even for its on-going steel production, JSW Steel was outsourcing part of its requirements from other Indian states at a higher cost due to non-availability of iron ore in Karntaka. The true impact of the re-opening of the mines, analysts feel, would only be seen in the fourth quarter of 2014.

The lifting of the ban on Category B mines will mean that JSW Steel could augment its capacity utilization from the current 80% to 100%, which means a shift from 8 million tons to 10 million tons.

by Sohrab Darabshaw