Sesa Sterlite has received statutory clearances, following which, the company has restarted Iron ore mining in Karnataka w.e.f. 27 Feb’15.
The company’s Iron ore mine in Chitradurga district (southern part in Karnataka) has production cap of 2.3 MnT pa and was non operational since Aug’14. Prior to mining ban imposed in the state, the mine used to produce nearly 6 MnT Iron ore per year.
The lease has been renewed for 20 years effective Oct’12 and forest clearance orders have been issued. Last month, Sesa had received environmental clearances from Centre and the State renewed its lease. In the month under review, Sesa expects to produce 0.7 MnT Iron ore of Fe 58-62%, which in all probability would be consumed by domestic steel mills.
Export of Iron ore which has been procured from Karnataka e-auctions are not prioritized by Supreme Court, until and unless a miner is unable to sell off the raw material to domestic purchasers. Exports would not be possible until the 3 major barriers are taken care of i.e. logistics constraints, differential freight charges imposed by railways and 30% export duty.
As Sesa is limping to restart mining as of now, we think, the miner may approach Supreme Court to allow exports, once it attains stability in production. Karnataka’s Iron ore mining industry expects the government to permit overseas sale, ensuring not to hurt domestic requirement, in case fall in sales volume via e-auction continues.
Uncertainty in domestic Iron ore supply pushed JSW Steel to import 9.1 MnT until now in FY15, consequently affecting sales in Karnataka e-auction, as the steelmaker leads purchases in the state. 19.3 MnT Iron ore has been allotted to various buyers via e-auctions in Karnataka, in the current fiscal year. Out of this, JSW has purchased 11 MnT.
Iron ore exports from India are unworkable because Iron ore fines (Fe 62%) prices have weakened to a 7 year low and are at USD 57-58/MT CNF China. Strict environmental norms have forced mills to cut steel production and resulted in low demand. To add, Chinese Iron ore prices may possibly go down further as supply glut continues to press prices.
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