Indian iron ore is a real schmozzle. Having destroyed its export advantage in Goa and Karnataka it’s now shut down half the mines in India’s largest producing state, Odisha. From Reuters:
India’s Supreme Court ordered on Friday the temporary closure of nearly half of the iron ore mines in top producing state Odisha due to non-renewal of years-old leases, in a blow to local steel mills that depend heavily on high-quality ore from the state.
Odisha, which allows exports of only half of total iron ore output, produced more than 70 million tonnes in the last fiscal year from 56 operating mines.
The move is unlikely to lift global iron ore prices given the limited flows from Odisha to international markets, but it could force Indian steelmakers to source the raw material overseas and soak up some of a forecast global supply surplus.
The 26 suspended mines produced about 40 million tonnes a year, said Odisha’s mines director Deepak Kumar Mohanty.
“We will abide by the court’s decision and work on renewing the licences for the affected mines within the stipulated six months,” Mohanty told Reuters.
…”There’s definitely potential for (iron ore) imports because it takes some high-grade tonnes out of the domestic market,” said Graeme Train, commodity analyst at Macquarie in Shanghai.
On the other hand, from the WSJ on the newly elected government:
A BJP government could boost iron-ore production and exports, which have collapsed to about 15 million metric tons in the financial year ended March 31 from 118 million tons in 2009-2010, before there were bans on illegal mining and bureaucratic delays in issuing new production licenses.
…”We are expecting a total revamp,” said Basant Poddar, vice chairman of the Federation of Indian Mineral Industries, adding that the government would likely strike a balance between domestic ore consumption, the environment and need for exports.
While the new administration could move quickly in pushing through environmental clearances at a central government ministry level, it may be more problematic to deal with some of the state-level and court decisions that have resulted in cuts to output and exports.
Shipments from India, which was the world’s third-largest exporter of iron ore until two years ago, have slowed to a trickle. The Supreme Court has eased the mining bans in two of the most important states—Karnataka and Goa—but output hasn’t picked up because of slow government clearances.
The BJP is already in power in Goa, which used to account for half of India’s iron-ore exports, and it has said it would seek the Supreme Court’s permission for an annual cap of 20 million tons iron-ore output in the state.
With 40 million tonnes of domestic production out of commission for 6 months, but other states now resuming production, this looks likes a moderate plus for the seaborne iron ore market.
