Report: Need to curtail iron ore export

With Indian iron ore exports from FY02 to FY12 estimated at around 900 million tonnes, equivalent to 562 mt of steel production, there is a growing need to curtail exports given that the country's exports could have supplied seven years of domestic steel demand.

A research report points out that beneficiation plants are already facing an acute shortage of iron ore fines for optimum utilisation of their existing capacity. Going ahead, with a further increase in steel-making capacity, the demand-supply gap for iron ore is likely to widen, which additionally supports the argument to curtail iron ore exports.

Iron ore has indisputably been the most important ferrous mineral for India, with its abundance not only imparting significant competitive advantage to the domestic steel industry, according to a Care Research report, but also garnering substantial foreign exchange in the exports market.

Iron ore mines on an average generate only 35 per cent of their overall production in the form of lumps (high grade ore), while the rest is by way of fines (low grade ore), which have relatively fewer buyers in the domestic market. Historically, with production far exceeding consumption, the report indicates that India is not only self-sufficient in iron ore, but has also remained a significant exporter in the global spot market, with China being its principal export destination.

However, blessed with significant reserves, India has emphasised only on processing the lumps, while there have not been adequate initiatives to process the more inferior grade fines which are exported, the report adds.

With curbs on illegal mining in the two major iron ore producing States of Karnataka and Goa accounting for more than 35 per cent share of domestic production, the report highlights how India has witnessed a significant decline in its iron ore production from a peak of about 218 million tonnes per annum (mtpa) in FY10 to about 135 mtpa in FY13.

In line with the fall in iron ore production and with no new development of mines, availability of lumps in the domestic market has also declined. Exports have also plummeted to a decadal low of about 18 mtpa in FY13, as compared to the peak of about 117 mtpa achieved in FY10, adds the report.

Despite having ample resources, the report adds that the situation of scarcity has led to a debate on the Government’s policy regarding iron ore exports and the distribution and allotment of existing and new mining assets.

Steel makers and private miners hold a completely contrarian view regarding iron ore exports. While the former are for banning exports, the latter are against the export ban.

With regard to the expected life of the domestic iron ore reserves base, the report adds that according to the United Nations Framework Classification (UNFC), the total iron ore resources in the country are estimated at around 28.5 billion tonnes as on April 1, 2010. However, approximately 45 per cent (8.1 billion tonnes) of the total deposits have been classified as `reserves'.

Private miners argue that the existing iron ore reserves, coupled with those likely to be discovered in ongoing exploration activities, are abundant enough to last the requirements of the domestic steel sector.

The majority of iron ore exports contain low-grade iron ore fines, which eventually has no takers in the domestic market, as the domestic steel industry is not capable of processing low-grade ore. The report adds that though the argument did hold considerable ground in the past, the situation has changed dramatically in the last three-four years.

Gauging the need for utilising fines, steelmakers in the last three-four years have taken corrective steps to enable the use of low-grade iron ore fines. These players, according to the report, are in the process of significantly increasing their sintering and pelletisation capacity, which also helps them in improving the quality of steel.

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