Karnataka expects increase in iron ore output

Market: Metals
03/07/14

Iron ore output in India's southern state of Karnataka may rise by around 5pc in the current fiscal year, although the state government accelerated regulatory approvals may see future production rise more significantly.

Karnataka's output may touch 20mn t in the 2014-15 fiscal year ending 31 March, up from around 19mn t a year earlier, forecasts the Federation of Indian Mineral Industries' vice-president H Noor Ahmed. But he expects the state to touch its output cap of 30mn t by 2015-16.

India's Supreme Court had banned iron ore mining in Karnataka's three key producing districts in 2010 to curb illegal mining and reduce environmental damage, with the ban not lifted until 2012. Only state-controlled mining firm NMDC was allowed to continue mining in the interim. Mining operations have resumed slowly as the state and federal government were slow in granting regulatory clearances to producers. Only 23 of the 115 mines allowed to operate in the state have resumed production.

"The state government is now showing more urgency in giving regulatory clearances, as the steel producers in the state are suffering from shortage of ore," Ahmed said.

The shortage has led to several sponge iron ore producers shutting down in Karnataka, while steel mills are currently operating at 50pc-70pc of their total production capacity. The state needed at least 40mn t/yr of iron ore to meet the steel industry's needs, Ahmed said, but the Supreme Court has set a production cap of 30mn t/yr. Efforts by the state government in January to raise the cap to 50mn t/yr were rejected by the court. Once the 30mn t/yr level is reach, the court may grant a higher production limit, Ahmed said.

Karnataka's largest steelmaker, JSW Steel, which operates a 10mn t/yr steel mill, has already booked seaborne iron ore cargoes of around 500,000t and is looking to secure more from neighbouring states to overcome its shortage.

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