The Supreme Court of India issued a judgment on illegal iron ore mining case in the state of Odisha on 02 Aug’17. In a common cause notice issued to Odisha based merchant miners; they were alleged of excess production beyond the granted EC (Environmental Clearance) limits. In its order, the Supreme Court (SC) called for the recovery of 100 percent compensation in lieu of the excess ore lifted to be submitted 31 Dec’17.
The Apex Court rejected miners plea of extension of the deadline and ordered miners on illegal mining to pay 100% compensation as recommended by CEC on or before 31 Dec’17 failing which the mines will be ceased from operating.
According to the CEC report, miners illegally extracted 215.5 MnT of iron and manganese ore in Odisha between 2000-01 and 2010-11.The CEC in an exhaustive report on illegal mining in Odisha mentioned the penalty figure for miners at INR 17,576.16 crore ( INR 17,091.24 crore for iron ore and INR 484.92 crore for manganese ore).
What happened?
After the Supreme Court verdict, most of the key miners in Odisha with huge penalty burdens have paid their share of compensation. Tata Steel, Rungta, state-run Odisha Mining Corporation (OMC), Jindal Steel & Power Ltd (JSPL), KJS Ahluwalia, Indrani Patnaik, Kaypee Enterprises, Aryan Mining & Trading Corporation and Tarini Minerals and K N Ram have made payments.
State government managed to collect Rs 8235 crore of penalty by the stipulated deadline.
Five working iron ore mines MESCO Steel, Serajuddin & Company, government-owned IDCOL, Essel Mining, Korp Resources and National Enterprises in Odisha have gone out of operations as they failed to pay out the penalties by the fixed deadline. These mines have the capacity to produce 20 MnT iron ore annually.
Indian Iron ore mining:
India’s iron ore production was recorded at 190.8 MnT in FY17. Odisha – India’s largest iron ore producing state accounted for a share of 50% and state’s iron ore output was recorded at 94.2 MnT (considering the material type of fines, lump and concentrate). On yearly premises, Odisha iron ore output climbed by 24% against FY16.
How has it impacted Indian iron ore market?
1. Hampered supply – Out of the closure mines, the market has been majorly impacted owing to closure of Serrajuddin mines as it is 2nd largest iron ore mine in Odisha with annual production 10 MnT. The miner has remained a major source of iron ore to JSW Steel, Essar steel along with other sponge and steel units. Closure of MESCO mines having annual production 2.5 MnT iron ore may also impact somehow but not to a greater extent as mostly it uses its mines for captive purpose.
Also, few major operational mines have utilized their EC limits which may further reduce iron ore supplies in the near term.
2. A sharp hike in iron ore prices by other merchant miners – Major merchant miners namely Rungta Mines, KJS Ahluwalia mines have further increased prices iron ore prices recently on 02nd Jan’18. Lump prices have further increased by INR 500/MT and fines prices have moved up by INR 300/MT. Prior to this, the miners had increased prices in last week of Dec’17 by INR 400/MT lumps and INR 200/MT fines.
Since the beginning of Nov’17, Odisha based miners have hiked offers by INR 1,700/MT.
3. Pellet Makers Raise Offers in Domestic Market – Domestic pellet offers in India have also increased sharply. A significant hike in offers was seen in eastern, central and western parts of the country. Pellet manufacturers in Barbil have raised offers to INR 6,400-6,500/MT (loaded to wagons) and INR 7,000/MT in Durgapur. Offers have increased by about INR 1000/MT in a month’s time.
4. Hike in Semi-finished and finished steel prices – Major Indian steel mills have raised flat steel prices by INR 1500-2000/MT for January on collective grounds of hike in iron ore and coking coal offers. Sponge iron prices in eastern India have increased by INR 800/MT in the last couple of days.
What may happen next?
As per the market sources report to SteelMint, the miners who have failed to submit the penalty will have to submit it. Also, another issue heard is the payment of penalty against violation of forest clearances.
According to trade sources, the miners are trying to collect funds. The next hearing on the same is scheduled on 17 Jan’18. There is uncertainty whether Court allows them to resume operation or not as it’s totally depending on court discretion after miners submit the penalty amount.
If iron ore supply disruption continues, the miners may further gear up for another price hike. Indian steelmakers have started exploring options of importing iron ore.
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