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Steelmakers push for iron ore export ban; miners say shortage artificial

Union Minister Dharmendra Pradhan recently said the government is considering imposing a short-term ban on exports of iron ore in wake of domestic shortage

twitter-logoNevin John | November 28, 2020 | Updated 22:53 IST
Steelmakers push for iron ore export ban; miners say shortage artificial
India's iron ore production witnessed a sharp de-growth of 50 per cent in the April-September period

The steelmakers in the country have demanded iron ore export ban as the shortage resulted in a spike in prices of raw material as well as steel. According to an executive in a large steel company, about 35-40 per cent of the iron ore produced in the country has been exported, primarily to China, as the Indian steelmakers struggle to meet their raw material requirements.

India's iron ore production in the April-September period at 47 million tonnes (MT) has witnessed a sharp de-growth of 50 per cent over the same period last year. This has been mainly on account of the change in hands of the expired iron ore mines, numerous evacuation issues and delays in clearances. The exports have witnessed a sharp rise of 63 per cent to 22 MT in the same period.

The iron ore supply, particularly in Eastern India has been affected as the mines which transferred, have not reached their full production levels. Even Odisha's 19 auctioned iron ore mines this year, only five mines are in operational, in which four mines are of JSW Steel whereas other mines yet to start iron ore mining. There are certain mining leases which need to bring up for auctions. JSW has earlier requested the government to look at the possibility of having a state-owned company to mine the ore from these 14 non-operational mines along with the mines whose leases are expired.

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Union Minister Dharmendra Pradhan recently said the government is considering imposing a short-term ban on exports of iron ore in wake of domestic shortage. Domestic iron ore prices across grades have doubled from Rs 4,000 per tonne to Rs 8,000 per tonne on an average, causing a spike in the cost of steel production.

However, iron ore miners described the shortage as "artificial". In a letter to the steel ministry, the Federation of Indian Mineral Industries (FIMI) said of the total 29 MT exports between April and September of the current fiscal, about 19 MT of ore were of lower grade which domestic steel companies do not use.

Big steelmakers with captive iron ore mines like Tata Steel, JSW Steel and ArcelorMittal Nippon are largely unaffected by the rise in raw material cost, but are getting the benefits of the resultant rise in steel prices.  

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It is largely the small Secondary steel players which witnessed huge losses because of a steep rise in iron ore prices. The secondary steel units contribute 50 per cent of steel production in India.

In 2019-20, India's iron ore exports rose to 37.69 MT from 16.15 MT in 2018-19, almost 133% jump. Owing to the strong demand from China, India exported nearly 30.86 MT iron ore, about 82 per cent of total exports to China alone.

India mainly exports lower grade iron ore, with up to 58 per cent iron content, having zero export duty to countries such as China, Japan, and South Korea. However, there are allegations that a major chunk of this grade consists of a blend of greater than 58 per cent iron, causing a huge unchecked dent to the exchequer. Export of over 58 per cent iron content attracts 30 per cent export duty.

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