India's Iron Ore Essay

1376 words - 6 pages

INDIA’S IRON ORE
(Reuters) - India, in its crusade against illegal mining, has choked its iron ore output and exports so hard that many companies are giving up on the sector.
The mining and export bans in the key states of Goa and Karnataka have brought miners and other businesses to their knees, forced steelmakers to buy iron ore abroad and seen hundreds of thousands laid off.
Following is a timeline of key developments in India's iron ore sector since Karnataka introduced its shipments ban:
India’s iron ore exports are set to increase as Goa prepares to auction unsold stocks, following the easing of a ban on sales of the steel-making raw material.
“Bids will be invited for about 15 ...view middle of the document...

Sesa Sterlite rose as much as 2.3% to Rs.197 and traded at Rs.196.40 as of 2:27pm in Mumbai. The benchmark S&P BSE Sensex rose 1.1%.Bloomberg
Top trader MMTC's $80 million iron ore export terminal, ready since 2010, has never handled a cargo. Now the company wants to spend $16 million to convert the terminal to ship coal.

Bans on iron ore mining and exports in top producing states of Karnataka and Goa have choked the industry so hard that MMTC is one of many firms exiting. Even if efforts to fully lift the bans make it past the many bureaucratic and legal hurdles, iron ore miners do not expect complete resumption of production until late 2014.

The bans, put in place as the government tried to clamp down on illegal mining, have cut the iron ore exports by around 85 percent, or 100 million tonnes, over the past two years. They have also reduced foreign exchange earnings by more than $17 billion in the same period, according to the Federation of Indian Mineral Industries (FIMI).
The structural shift in India's iron ore industry could be a blessing for other suppliers, as demand growth from top market China slows and Australian miners Rio Tinto and BHP Billiton ramp up output. It will also make it harder for India to regain its spot as the world's No.3 exporter of the steelmaking raw material.

"It's pretty evident that there's lasting damage to the industry," said R. K. Bansal, a secretary general at FIMI. "But if the government of the day at the state and central level, as well as other authorities, stick their neck out and take decisions then this paralysis can go."

Mining in Goa was banned in September 2012, freezing shipments that reached about 50 million tonnes in the 2010-11 fiscal year. In neighbouring Karnataka, where the ban started in 2011, exports remain frozen even though it was lifted in April. In both states, the bulk of mining was done by private companies, which were accused of mining outside lease areas and in excess of set limits.

MMTC was banking on business from Karnataka when it invested along with partners Sical Logistics Ltd and L&T Infrastructure Development Projects in an iron ore terminal in Ennore Port in Tamil Nadu.

"We think that at least in the next five to six years there will be no exports of iron ore," said SM Babu, general manager at MMTC's Chennai office. Instead the joint venture company hopes to tap growing demand for coal-fired power plants in Tamil Nadu.

Only 16 out of 115 mines have resumed mining in Karnataka. For those keen on returning, the bureaucratic hurdles can be overwhelming.

"There are about 30 or 40 companies whose quantities are so low that they will never restart," said Basant Poddar, owner of Mineral Enterprises Ltd, which has four mining leases in Karnataka but none operating currently.

"For those willing, the issue is with forest clearances. The whole process...

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