In view of the “shortage of supply of iron ore in the market”, the Union Ministry of Mines has issued a couple of orders recently slightly modifying its Sept’19 notification of allowing PSU steel major SAIL to sell 25% of its total captive iron ore production in the open market.
The 2019 order contained the rider that SAIL had to acquire permission from respective state governments before selling iron ore from its captive mines in Odisha, Jharkhand and Chhattisgarh. Due to the prevailing tight supply of iron ore in the market, the new notification states that the steel-maker can sell 25% of its total production in a state “under intimation to the state government and the Indian Bureau of Mines”, as taking permission from a state government “may take time”.
In a separate notification, the Ministry states that with an eye on “complete utilisation of all grades of material” the earlier order of allowing SAIL to sell sub-grade materials lying at its mine pitheads stands, although the steel major no longer needs to take mandatory permission from state governments – a formal “intimation” to state governments and the IBM will suffice.
The rationale behind tweaking the regulation related to permission is the urgency that is required to tackle the “supply shortage of iron ore” in the market as well as the potential for SAIL’s captive mines to increase production, according to some estimates by 10-12 mn t by 2021-2022.
Note that SAIL is yet to acquire permission from the Jharkhand government regarding sale of iron ore fines from its captive mines in that state, although Odisha and Chhattisgarh governments has given the formal go-ahead in this regard. The PSU steel major has sold over 2 mn t of iron ore at auctions from Odisha and Chhattisgarh mines till Nov’20 this year, according to SteelMint analysis.
A SAIL official informed that although the recent orders should facilitate quicker disposal of the stockpile of sub-grade materials at its mine pitheads – especially in Jharkhand and Odisha – necessary prior evaluation of the stockpile by officials from the IBM and respective state governments will inevitably take time.
In the short-term, so long as supply tightness persists, especially in Odisha, we expect SAIL to allocate higher iron ore volumes at the periodic auctions conducted by the steel-maker.
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