India: Market may endure Jharkhand Mines closure for a month; late reopening will invite Imports

Behind Karnataka, Goa and Odisha, lastly Jharkhand has also been trapped under the scanner of mining guidelines and environmental worry.

On 15 May’14, Supreme Court asked Union government to take action against mines running under 2nd and 3rd subsequent deemed renewal and Central government on 18 Jul’14, ordered state to get tough on the mines.

12 Ore mines (11 Iron ore & 1 Manganese ore mines of Vijay Kumar Ojha) running under 2^nd and 3^rd subsequent deemed renewal i.e. with non renewal of mining licenses in West Singhbhum district of Jharkhand, had been asked to cease operations by District Mining Officer (DMO) of Chaibasa (Jharkhand), on 05 Sep’14.

In FY14, Jharkhand contributed 15% to India’s entire Iron ore production with nearly 22.4 MnT i.e. around 16.3 MnT from captive mines of Tata and Sail and 6.1 MnT from private mines. In FY13, Jharkhand’s total Iron ore output was 18 MnT i.e. 13% of country’s overall production.

Source: SteelMint Research

Miners such as PK Jain and OMM were to receive new EC of 3 MnT pa and 2 MnT pa each.

Jharkhand government is confronting revenue losses from the captive miners because royalty and other taxes are stuck. Thus, it appears that granting of licenses and permitting captive miners to start operations, might not be late. But, it’s difficult to guess for private mines; production of state based Iron ore consumers could be impacted if reopening is delayed.

A senior officer of Jharkhand Government told SteelMint, “We are actively working on opening up of captive mines first but at the moment, not in a situation to point towards any specific dates. The subject has already been put up from District level to State level and judgment awaited”.

As of now, effect of mines closure on Indian domestic market is less because private (closed plus operational) mines share is about 27% in entire production. Whereas, captive mines with 73% production share, uses Iron ore for in house consumption.

Sources mentioned that captive miners existing stockpile may possibly be sufficient for a month and by then, government could allow mining to restart. And, Iron ore laying at mines head is not allowed for transferring at plant site.

If the situation doesn’t favors miners soon, SteelMint foresees aggressive imports and rise in input cost as Iron ore imports are expensive by nearly INR 6,650/MT in contrast to cost of production from captive mines.

Owing to rising imports and shortfall in domestic market, Steel Ministry has written to Finance Ministry to consider withdrawing import duty on Iron ore, which is 2.5% currently.

Mines that had received or were in anticipation of getting their first renewal or were given fresh lease in the recent past were safe. These Iron ore mines are Rungta Mines, Anindita Traders, Usha Martin, Messers Anil Kumar Khirwal and Shah Brothers.