India throws $15-bn lifeline to world iron ore miners

Nov 30 2012, 03:32 IST
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SummaryThe government’s efforts to clamp down on illegal mining have handed a $15-billion lifeline to global iron ore giants, and there could be more to come.

October — the lowest in at least two decades — after the ban in Goa. That followed a mining ban in Karnataka in 2011, after shipments there were halted a year earlier.

Goa's once-bustling mining hubs have turned into ghost towns, with scores of empty trucks parked by roadside. Trains, some still loaded with ore, are stopped on the tracks. "We have been sitting idle for over two months now," said Pritesh Gawas, a 25-year-old worker at Sesa Goa's Sonshi mine.

In January-October, India's shipments to its biggest market stood at 32.6 million tonne, down nearly half from a year ago, Chinese customs data showed, with South Africa edging it out as the No. 3 supplier. Shipments from Australia and Brazil were up 20% and 12%, respectively.

The flipside is that India is also starting to ship in iron ore in significant quantities. India has imported 9 million tonnes of iron ore so far in the fiscal year that began in April, estimates Basant Poddar, vice president of the Federation of Indian Mineral Industries, and could ship in 15 million tonnes for the full year.

“It is a sad situation that we cannot mine in our own country legally and supply to our own domestic steel industry," Poddar told Reuters. Importers include big producers Essar Steel, Bhushan Steel and JSW Steel, he said.

For the next fiscal, India's iron ore exports may be no more than 15 million tonne, while imports could climb to 20-25 million tonne, said Poddar, making the country a net importer for the first time ever and hurting the competitiveness of its steel producers.

“Being an iron ore-rich country like India, it doesn't make sense to produce steel on the basis of imported iron ore. It doesn't work out economically for the steelmakers," said Gunjan Aggarwal, senior consultant at research firm CRU in Mumbai.

Of the 800 iron ore leases in the country, only around 300 are operational, said a senior mines ministry official, adding that the supply squeeze should be short lived.

"Systems are being tightened at state-level ... but once the system stabilises, the supply crunch will ease out," said the official, who declined to be named as he is not authorised to speak to the media.

The mining bans in Goa and Karnataka, which at one point shut all mines in the two states, could now spread to the eastern state of Odisha, which was visited by the Shah Commission earlier this

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