Iron ore output likely to jump 25% in FY16, pushing down imports

Bhubaneswar: Iron ore imports by the country are projected at five million tonne this fiscal, nearly a third of 15.1 million tonnes (MT) that the country imported in 2014-15 on the back of surplus availability of ore in the domestic market.

The reopening of some key iron ore mines in top producing states of Odisha and Karnataka would increase production in this fiscal, feel industry watchers and analysts. Iron ore output in the country is seen at 153 MT by the close of this fiscal, higher than 123 MT logged in FY15.
 
“Opening up of the closed iron ore mines in Odisha, Karnataka & Goa, the major mining states, has resulted into increased supply of materials in the market, thereby causing prices to fall,” said Manish Kharbanda, executive director and group head (mines & minerals), Jindal Steel & Power Ltd (JSPL).
 
“This, in turn, has made the domestic steel makers to go for domestic raw materials, resulting in fall in import of iron ore in this fiscal,” he added.

Analysts feel subdued demand in steel and falling rupee will play a role in pulling down imports.
 
“Due to domestic supply issue, India saw import of iron ore in the last two fiscal years but given subdued market of steel and iron ore and fall in domestic iron ore prices, the trend is not expected to sustain. Any notable import of iron ore is not expected going forward. Further, falling rupee will make import of iron ore costlier”, said Pukhraj Sethiya, associate director- energy (coal & mining) at PricewaterhouseCoopers (PwC).
 
Following the enactment of the amended Mines and Minerals (Development & Regulation) Act, Odisha has already issued orders to extend validity of 50 odd mine leases. Of this 27 iron ore mines have re-commenced production, raising hope of robust output. Odisha's iron ore production is pegged at 65 MT this fiscal, up from the lowly 47 MT that the state achieved in the year-ago fiscal, marred by shutdown of 26 crucial iron ore mines after a Supreme Court order in May 2014. The state, the biggest iron ore producer, is tipped to contribute 42.5% of the country's overall iron ore output in FY16.
 
Ore output in Chhattisgarh will move up marginally from 31 MT to 33 MT this fiscal. For Karnataka and Jharkhand, the growth is also projected to be modest. The ore output in Karnataka is projected at 24 MT, up from 21 MT last fiscal, while Jharkhand is expected to improve its tally from 17 to 19 MT. Goa, which produces low grade ore, predominantly meant for exports, will add 5 MT from a zero base since iron ore mining was banned in the state a few years ago.

Apart from enhanced availability in the domestic market, currency fluctuations would also have a bearing on imports of iron ore. JSW Steel (8.4 MT), Tata Steel (3.06 MT) and Essar Steel (0.23 MT) were the major importers in FY15.

“With rupee remaining predominantly weak over this fiscal so far and currently hovering around 65 opposite USD, iron ore imports continues to be expensive. Unless the rupee improves significantly by the end of this quarter in the range of 60-63 vis-a-vis USD , there will always be pressure on quantum of imports of iron ore”, Kharbanda said.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.