The ban on iron ore exported from the state of Karnataka is having downstream effects on the production of Indian steel, according to a story today in The Hindu Business Line.
Quoting sources in the Bellary-Hospet region, the website says that several large, local steel plants rely on iron ore produced in Karnataka, which supplies about one quarter of India's iron ore.
Before the export of iron ore was banned in Karnataka in 2009, the state was producing about 42 million tonnes of iron ore and exporting 28 million tonnes. The following year, after the ban was implemented, 33.6 mt was produced, of which only 7.4 million tonnes was exported.
But if all the iron ore pellets were used for sponge iron, pig iron and steelmaking, 41 million tonnes or iron ore would be required, or 33 million tonnes if the mills run at 80% capacity, leaving a significant supply shortfall, Hindu Business Line explains.
The news creates more uncertainty in an already tumultuous time in the Indian iron ore market, with the resignation last month of a key figure in the Karnakata state government, who was forced out of office over allegations of corruption.
B.S. Yeddyurappa, head of the Hindu nationalist Bharatiya Janata Party government in Karnataka, resigned July 31st after he was accused of being at the centre of a $3.6 billion mining fraud.
A damning 8000-page report by the Lokayukta, the Karnataka state ombudsman, named a slew of politicians, mostly from the BJP party, as participants in the illegal plunder of the Indian state’s iron ore resources.
Karnataka banned export shipments of iron ore in 2009 as a measure against illegal mining and the need to preserve the raw material for local steelmakers. The Indian Supreme Court lifted the ban in April, but reinstated it last month in Karnataka's Bellary district on concerns of environmental degradation. However, the court also allowed that state-run National Mineral Development Corporation (NMDC) be permitted to mine up to 1 million tonnes of iron ore per month, on the condition that the ore is not exported.
The NMDC ore, however, does not appear to be enough. The Pioneer reported on Monday that JSW Steel said it will operate its steel units in Karnataka’s Vijayanagar district and Tamil Nadu’s Salem at around 80 per cent capacity of 11 million tonnes per annum due to a shortage of iron ore.
The story in Hindu Business Line quotes an anonymous steel maker saying "the local steel industry's need for ore is too huge to be satisfied," and suggests that there will be downstream effects if the situation continues:
Sources also argue that with steel capacity in the country at 78 mt and likely to touch 120 mt by 2012-13, investments in downstream industries for steel plants using iron ore would be hard to come by if supply of ore is stopped or rendered dear. Illegal mining should not be used as an excuse to deny downstream industries from procuring the ore for value-addition, they said.