‘User industry is unnecessarily exaggerating iron ore shortage’

While the steel industry has been flagging the iron ore ‘shortage’, miners are of the view that the user industry has been unnecessarily exaggerating the issue. JSPL’s managing director VR Sharma clarifies in a conversation with Surya Sarathi Ray. Excerpts:

Is there shortage of iron ore?

Yes, there is a shortage of iron ore in the range of 30-40% and that is precisely the reason that iron ore prices are going up and that’s why steel prices are also going up in the country. The major reason for the shortage is lower production of iron ore in the country.

Why is iron ore production lower?

Iron ore production is lower because a good number of mines that changed hands through auctions in February 2020 have not yet started production in Odisha in full swing. Odisha auctioned 19 mines out of which five were captive and 14 were in open category. The change in auction rules where captive and merchant miners were allowed to bid for the open category, a lot of them has gone to captive users. Some clearances are pending for them. There lies the problem.

How have the prices gone up in recent times?

Lower availability have led to a sharp rise in the iron ore prices — more than 50-60% on an average compared with June. Prices of scrap, metallic, pig iron, DRI, HBI has also increased internationally. At the same time, domestic steel demand has also picked up and in commensuration with that, steel makers have increased production. The rise in production requires more iron ore.

What could be the solution?

Ad-hoc relief should be provided. Production should be incentivised. Environment clearance should be given to grant miners to produce 25-30% over the permissible limits. Royalty should be reduced. Both captive and merchant miners should be asked to sell at least 25% of their produce in the open market. SAIL and Tata Steel, which possess captive mines, should be asked to sell 25% of their produce in the open market. The railway freight should be reduced by 25%.

Do you also suggest a temporary ban on iron ore exports?

Yes, that is an option; India can resort to temporary ban on higher grade iron ore, but low-grade iron ore (below 58%) exports may continue because Indian mills don’t use low grade iron ore.