With NMDC set to restart mining at Donimalai in Bellari district of Karnataka, iron ore supply is bound to increase and bring down prices particularly when many sponge iron and pellet manufacturers in the State have shut operations due to rise in cost and weak demand.
The largest steel producer in the State JSW Steel will be the major beneficiary as it was sourcing iron ore from another State in order to bridge the supply shortfall.
Seshagiri Rao, Joint Managing Director, JSW Steel, told BusinessLine the 62-Fe grade iron ore in the State was selling at a premium of ₹3,460 a tonne due to short supply while it was available at ₹2,860 in Odisha and Chhattisgarh.
The recent amendment to the Mining Act will pave way for NMDC to restart production at Donimalai leading to a drop in price by ₹600 a tonne, he said.
NMDC, which owned Donimalai mine since 1968, suspended operations last November after the Karnataka government sought 80 per cent premium on iron mined to renew its lease for another 20 years. The state-owned company moved the Karnataka High Court which set aside the condition on premium in July.
Subsequently, in August, the Karnataka government withdrew the demand and decided to auction the iron ore mine as per the Mines and Mineral (Regulation) Development Act.
Ending months of stalemate, the Centre on September 27 amended the Mineral (Mining by Government Company) Rules, 2015 and made renewal of mining leases of public sector companies mandatory without going through the auction process.
Rao said the current steel demand is weak but is expected to pick up with the government announcing various measures and seasonally the second half of the fiscal is always much better than the first due to several festivals.