Domestic iron ore supply to shrink in a year's time

Beyond the current supply crunch of iron ore in global market, domestic supply situation is likely to shrink significantly in a year’s time.

Steel production in the country could be significantly affected if the auction of iron ore mines which would complete 50 years of operations by March 2020 is materially delayed, believes India Ratings and Research.

Significant risk to ore output Ind-Ra’s assessment shows license of about 288 merchant mines will expire by March 2020, out of which 59 mines are under operations.

“Majority of these 59 mines are iron ore mines situated in Odisha and Karnataka with around 85 million tons of approved annual capacity. Ind-Ra estimates that around 60 million tons of the actual production of iron ore from these mines could be disrupted. Considering that the auction process on an average takes three to six months to complete, a delay in initiating them until the latter half of 2019 due to the Lok Sabha elections in the country could affect the timely auction of mining lease,” a research report published by the agency said.

Stagnant domestic availability

The risk of domestic ore availability is compounded by poor track record of earlier auction process outcomes.

“Of the last major auctions of about 88 iron ore deposits, only a handful have started to operate. Auction to operation process gets elongated typically due to delays in obtaining environmental, wildlife and forest clearances. Resource prospection is a pre-requisite for auction which some of these mines may not have at the moment,” the report states.

JSW Steel has been among of the few players which have been able to start production from mines acquired through auctions.

India’s iron ore output has failed to grow to any meaningful level partly because of faulty government policies, believes Rana Som, former chairman cum managing director of National Mineral DevelopmentCorp (NMDC).