Lack of quality iron ore pushes demand for pellets

Usage of pellets in steel making is increasing due to decline in availability of good quality iron ore lumps and also to adhere to stringent pollution norms put in place by various governments.

Speaking at the KIOCL's 35th Annual General Meeting Mr K. Ranganath, Chairman and Managing Director of the company said that the global pellet production capacity is expected to touch 500 million tonnes by this year end as against the 380 million tonnes capacity during 2009.

“Brazilian pellet maker, Vale, the biggest producer of iron ore pellets is continuously increasing pellet production capacity by setting up plants near markets to cover total global demand,” he added.

India, the third biggest exporter of iron ore, is also increasing the pellet production capacity continuously to utilise low grade iron ore and to meet the increased demand.

The pellet capacity in India is expected to touch 50 million tonnes by the end of 2012. Most of the plants are coming up in Karnataka and Orissa where low grade fines are available abundantly with good water supply and logistics. “The cost of production in India is higher due to high energy costs, due to which Indian pellet manufactures are in a disadvantageous position. However removal of export duty on pellets by considering it as a value added product has provided some relief to pellet producers,” pointed out Mr Ranganath.

Iron ore market

According to Mr Ranganath, the demand for iron ore continues to improve during the first-half of 2010 with rebounding of the global economy from mid-2009. With mainstream countries embarking on many infrastructural projects, the demand for steel went up resulting in improved demand for iron ore.

The total iron ore production during 2010 was around 1,851 million tonnes, an increase of about 15.4 per cent over 2009 production of 1,603 million tonnes. This is also a new record for global iron ore production.

Australia with a production of 433 million tonnes of iron ore stood first, Brazil occupied the second spot with a production of 398 million tonnes followed by China and India with production of 359 million tonnes and 231.5 million tonnes (estimated) respectively. The above four major iron ore producing countries accounted for 76.8 per cent of total iron ore produced globally during 2010.

Mr Ranganath said during 2010, India produced about 231.5 million tonnes (estimated) of iron ore out of which about 117 million tonnes (estimated) of iron ore was exported. This figure is likely to come down in 2011 due to restrictions imposed by Karnataka on iron ore exports.

Karnataka accounts for 35 to 40 per cent of iron ore exported from India. Also, in order to discourage iron ore exports, the Central Government imposed an export duty of 20 per cent on iron ore fines and lumps. But the export duty of 15 per cent which was levied on iron ore pellets was withdrawn as iron ore pellet is a value added product.