MINEWEB reported that Sesa Goa, a company that is part of Vedanta Resources and which part financed Sterlite's USD 10 billion takeover of Cairn India, expects iron ore production in India to fall by about 24% in the current financial year.
It has based this forecast on two points: regulatory constraints and production caps. The company itself claims to have been somewhat of a victim of these hurdles as its profit fell 76% due to lower volumes and weak ore prices.
Sesa Goa was unable to produce iron ore from its mines in the Southern state of Karnataka in the June quarter because of the mining ban in place, thus part impacting its bottom line. Production was down to 2.8 million tonnes from 3.2 million tonnes a year ago.
Standard Chartered too has said India's iron ore exports will stand at 39 million tonnes in FY13. Last fiscal year, ore exports stood at 55.2 million tonnes.
Meanwhile, a Unctad report has said global iron ore use is expected to increase from 1.92 billion tonnes in 2011 to 2 billion tonnes in 2012, and 2.08 billion tonnes in 2013. Iron ore production and trade had set new records in 2011.
Among major producers, Australia increased production by 12.7%, Brazil by 5.1%, and China by 2.1%. Production in India declined to an estimated 196.0 million tonnes in 2011, down 7.5%.
So, what ails iron ore production in India? Many sector analysts have been saying Sesa Goa's iron ore production may take an overall dip this fiscal.
Mr RK Sharma secretary general of the Federation of Indian Mineral Industries said export of iron ore is no longer a viable proposition. He said that "We are not in a position to make any estimation for exports during the current year. Given the prolonged ban on mining in Karnataka, restriction on mining in Odisha and Goa, along with a high railway freight rate and 30% export duty, it just doesn't make sense to export.”
The ban on mining in some Indian States like Karnataka, Goa and Odisha is one of the many reasons domestic and international steel manufacturers have been hit, thin profit margins is another.
Take the eastern State Odisha for example. It is the largest producer and second biggest iron ore exporting state of India. It has the Joda, the largest mining circle in India in terms of iron ore production, with more than 40 million tonnes of annual output. Joda accounts for a fourth of India's total output.
As per data available with the Odisha steel and mines department, in the first quarter of the current financial year, traders in Joda mining circle lifted 57% less iron ore for export purposes compared with the year ago.
For 2012-13, the state steel and mines department has capped the iron ore production for Joda mining circle at 40 million tonnes. As a result, a maximum of 400 trucks can be allowed per day to carry material from this circle for export purposes.
Like Odisha, lower margins are also affecting states like Jharkhand. Meanwhile, Karnataka, on the other hand, has yet to resume export operations.
(www.steelguru.com)
