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India Offers Market To Glut-Hit Iron Ore Mines

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An oversupplied global iron ore market may find some relief from an unlikely source as former No.3 exporter India turns into a big importer due to a cutback in domestic production.
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."

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