The country may ship
in up to 45 million tonnes over the next three years as home-grown iron ore
output falls short of domestic steel production needs, an executive at an
influential industry group said.
India imported just 0.37 million
tonnes of the steelmaking raw material in 2013/14, government data showed. But
already JSW Steel, India's third-largest maker of the alloy, has said it will
import 6 million tonnes of iron ore in 2014/15 against zero a year earlier.
"There's no option but to
import to meet the shortfall. We're looking at between 10 and 15 million tonnes
every fiscal year over the next three years," Basant Poddar, vice
president of the Federation of Indian Mineral Industries, the only industry
group for mining firms in the country, told Reuters by phone.
"The mine closures all over
India, starting from Karnataka, Goa, Odisha and Jharkhand, have created a
massive disruption to supply," Poddar said.
Mining in the key iron ore states
of Karnataka and Goa was banned in 2011 and 2012, respectively, following a
crackdown on illegal mining by the Supreme Court and the government. Several
mines in top producing Odisha state and in Jharkhand too were closed this year
following government-imposed restrictions on the renewal of mining licenses.
While the bans have since been
lifted, delays in restarting mining operations in Goa and Karnataka and the
latest mine closures in the other states have limited local iron ore supply.
The disruptions have cut India's
iron ore production to 152 million tonnes in the year ended March 31, from
about 218 million in 2009/10, according to the Indian Bureau of Mines.
The prospect of higher demand from
India comes at an opportune time for global iron ore miners, whose margins have
been shrunk by a 40 percent slump in iron ore prices this year.
Iron ore fell to $81.90 a tonne
last week, its lowest since September 2009.
The bulk of India's imports may
come from Australia and South Africa, said Poddar, and unlikely from Brazil
where shipments are usually made in big vessels. "Indian ports are not
geared to handle large vessels," he said.
But the potential import volume
won't be enough to absorb the total projected global surfeit. Morgan Stanley,
which sees a global surplus of 79 million tonnes this year doubling to 158
million tonnes in 2015, expects the price to drop to $70.
In addition, any relief from Indian
demand may be temporary, as the domestic shortage is due to government policy
measures that could eventually be reversed.
BUREAUCRATIC ROUTE
For the present, resuming operations has been slow due to
the long bureaucratic route to renew mining leases, said Poddar.
Only 22 mines out of 122 that are eligible to restart in
Karnataka have resumed operations, said Poddar who owns Mineral Enterprises Ltd
which has five mines in the state that have a combined capacity of 1.2 million
tonnes but have remained shut. Mines in Goa have not reopened.
In Odisha, around a third of 56 iron ore mines are still
closed and in Jharkhand, the third biggest producer in the past fiscal year, 12
out of 17 mines are shut.
India used to be the world's No.3 iron ore exporter until
higher costs along with the mining bans slashed shipments by 85 percent, or 100
million tonnes, over the past two years.
Amid the shortage in local supply, iron ore prices in India
are defying the global weakness.
In Odisha, 63 percent grade iron ore would cost about $105 a
tonne, including taxes and the royalty, to export, way above the current global
market price of $67-$68, said Dhruv Goel, managing partner at industry
consultancy SteelMint.
But miners make a profit of $15-$20 a tonne selling the same
grade to local steelmakers, said Goel.
"It is certainly profitable to sell in the domestic
market."
Source: Reuters