Almost all leading integrated steel makers and secondary producers have intensified iron ore sourcing to avert raw material crunch and ensure uninterrupted plant operations
Steel manufacturers and other end user industries have accelerated iron ore buying as they dread marked disruption in supplies after the end of lease tenure of merchant mines by March 31, 2020.
Almost all leading integrated steel makers and secondary producers have intensified iron ore sourcing to avert raw material crunch and ensure uninterrupted plant operations. They are looking to build up stocks for three to six months. Steel companies are weighing options to stash the ore in stockyards by availing land on lease. The Odisha government has previously allowed storage permits for both end user industries and merchant ore producers whose validity runs till March 2022.
The grant of storage licenses for the merchant miners was warranted by the huge inventory of minerals within lease area. The disposal and sale of this stockpile was needed to facilitate smooth transition of ownership of mines and also to avert any obstruction in their production after take over by the new bidders following auctions.
“We are now witnessing brisk buying from steel players and secondary steel producers. Merchant miners have not gone for any significant hike in prices of lumpy ore or fines of late as we need to liquidate the piled up ore. An uptick in domestic steel demand and the impending expiry of lease tenure has spurred intense buying of iron ore”, said a leading merchant miner.
Industry sources have estimated the accumulated ore at mine lease heads of merchant mines in Odisha at around 70 million tonnes (mt). However, a bulk of the inventory is made up by baser grade fines which hardly have any uptake in the domestic market. Steel manufacturers opt for lifting higher grade ore as inferior material escalates their costs of operations. Export markets too have been unkind to Odisha’s inferior iron ore as China’s steel mills driven by environment concerns have preferred to source superior ore or iron ore pellets.
Supply disruptions of iron ore seem ineluctable as the Union government is yet to take a firm call on extending environment and forestry clearances. Even if the two key milestones are negotiated, the new leaseholders still have a bumpy ride to cover before they could lay hands on the mines. A host of approvals like Mining Plan endorsed by Indian Bureau of Mines (IBM) and Consent to Establish & Consent to Operate granted by the State Pollution Control Board (SPCB) need to be obtained.
Odisha has 21 iron ore and manganese mines whose lease validity ceases by March 31, 2020. Of the lapsable mines, one mine whose current incumbent is RP Sao is reserved in favour of a state PSU. The rest 20 mines have been concomitantly notified for online auctions. The state steel & mines department has set January 3 as deadline for submitting technical and financial bids in respect of these 20 blocks. Letters of Intent (LoI) are scheduled to be awarded in the first week of February 2020.
Frenzied buying of iron ore is not expected to shoot up prices at least till the merchant mines are operative.
“Despite aggressive buying from steel industries, merchant miners are unlikely to up prices. Over the last 30 days, iron ore prices in Odisha have only marginally rose by Rs 200-300 per tonne. But any further hike seems improbable till March 2020 as the miners are bent on clearing the accumulated ore”, said an official with a steel company.
As their lease validity heads for expiry by March 2020, merchant miners for the past two months are producing 100 per cent of the mandated limits under environment clearance (EC) compated to 60-70 per cent earlier.
Odisha is the country's biggest iron ore producer. In last fiscal, the state produced 114 mt, contributing more than 50 per cent to the nationwide output. In FY20, Odisha's iron ore production is expected to grow 20 per cent as production quickens from merchant mines.
Reference: Business Standard Newspaper
Dated: 03/02/2020
