Steel companies in Karnataka peg iron ore inventory at just one-third of that claimed by miners

Suresh P Iyengar Mumbai | Updated on April 29, 2019

Representative image

Iron ore pile-up due to high pricing, says Karnataka steel body

Steel companies in Karnataka have pegged iron ore inventory in the State at 2.24 million tonnes (mt) rather than 6.5 mt as claimed by miners who are lobbying hard with government to export the surplus.

Unlike other States, iron ore production and sales in Karnataka is restricted in recent years to weed out illegal mining. A Supreme Court-appointed committee fixes annual production quotas, while sales are channelled through e-auctions.

According to the Karnataka Iron and Steel Manufacturers Association (Kisma) the Supreme Court-appointed committee fixes iron ore production target based on the demand.

But steel companies have held back from bidding for certain quantity of iron ore offered in e-auction as some of the miners are fixing a higher base price for low grade iron ore with high manganese and bauxite content, said Ramana Kumar, Secretary, Kisma.

In FY18, miners in the State produced 27.65 mt of ore and sold 27.89 mt through e-auction. In FY19, they produced 28.49 mt and sold 26.25 mt, resulting in an inventory of 2.24 mt.

The inventories are lying largely with the Karnataka State Mineral Corporation (formerly Mysore Minerals) and Sesa Goa each holding about 1.5 mt and with Minerals Enterprises about 0.6 mt.

Inferior quality ore

Most of these miners are setting the base price 40 per cent higher compared to better quality iron ore supplied by NMDC from its Odisha mines, said Kumar.

For instance, Mysore Minerals’ material has high levels of impurities and manganese content of over 8 per cent against the benchmark manganese content of less than 0.5 per cent and iron content of 58 per cent.

In an affidavit filed in the Karnataka High Court, NMDC has claimed that iron ore in the State is being sold at ₹2,597 a tonne against ₹1,208 in Odisha in FY19 (up to September). In FY18, NMDC had said Karnataka iron ore was sold at ₹2,475, while in Odisha it was priced at ₹922.

Kumar said Karnataka miners should price their inventory based on the quality of ore.

Royalty issues

They have started increasing prices of inferior iron ore following short supply in market after NMDC’s Donimalai mine was shut late last year, he added.

NMDC iron ore production was 2.24 mt lower last fiscal compared to the preceding fiscal after the Karnataka government refused to renew its lease to mine at Donimalai — one of the largest iron mine in the State. The government had demanded 80 per cent of the company’s revenue generated from Donimalai.

Published on April 29, 2019

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