Indian iron ore miners cut output on low steel mill demand

BS reported that India’s independent iron ore mining companies have cut output by 80% since June due to uncertainty over exports and recovery in demand from domestic steel mills Mr RK Sharma secretary general of the Federation of Indian Mineral Industries said that Southern Railway, which used to transport 25 rakes everyday is handling only five. The same is the case for the entire country. Hardly 20% of India’s normal total annual output of 235 million tonnes is being extracted from mines across the country.
Independent iron ore miners do not have steel production facilities and therefore sell the entire output to others.
There are 3 reasons for the fall in output.

First, the government raised the royalty to 10% of the cost of output from INR 27 per tonne about a year ago. Second, the world’s largest steel producer, China banned import of low grade iron ore through traders. This hit hard as most of India’s iron ore exports are through traders and comprise mainly low grade ore.
Then, before the companies could find alternatives, the Karnataka government denied renewal of transport at licenses to miners in the state, the stated reason was crackdown on illegal exports. Around 40% of the country’s mineral output comes from the state.
An analyst said that only a few commitments that were negotiated before the ban are being executed. New mining activities for the current season have not started. Generally, the New Year demand starts in the first week of September. But this year, the uncertainty over the mining industry has cast a shadow over steel and allied industries.
A senior official of MSPL said that banning exports across the board affects genuine miners, too. Most ore mined illegally was being consumed by small local steel mills operating in the vicinity of the mines.
Mr Glenn Kalavampara secretary of the Goa Mineral Ore Exporters Association said that the post monsoon demand has not come yet because of intermittent rain in the state. Since high moisture affects quality, miners generally avoid transport during this season. A clear picture would emerge only in the first week of October.

Source: Business Standard