Live Markets »News & Advice»Latest Stories»Latest Stories Details
Latest Stories Details
Back

Karnataka iron ore offtake falls sharply, only 25% of NMDC's output sold

T E Narasimhan/Chennai 14 Jun 18 | 11:52 PM

Representative Image

Sale of iron ore from Karnataka mines, including state-owned NMDC's, has fallen sharply with user industries, mainly steel units, buying the commodity from Chattisgarh and Odisha due to better quality with reasonable cost.

Related Stories

    No Related Stories Found
Widgets Magazine

NMDC has had an offtake of only 25 per cent the past two months, while for other miners the number's even lower as they claim steelmakers are arm-twisting them on price. However, steelmakers justify their position saying sourcing from other states helps them clock better profits as the quality is superior. They say high prices in Karnataka have forced small user industries to shut down or lower capacity utilisation.

Karnataka's total mining capacity is around 35 million tonnes and last year utilisation was about 80 per cent. During the past two-three months, there has been a pile-up of unsold stock of around 2.8 million tonnes of iron ore. To avoid further inventory buildup, companies have either stopped mining or have reduced the utilisation.

NMDC mines around 12 million tonnes of iron ore in Karnataka. The company’s management says production at its Donimalai mines has decreased due to stockpiles following poor offtake by customers. 

April onwards, only 25 per cent of ore has been sold through e-auction against the offered quantity. 

Karnataka Mining — a glimpse

* Total capacity of Karnataka iron ore mines - can be extended upto 40-45 MT 

* Supreme Court increased mining cap to 35 million tonnes from 30 mt, effective 2018-19

* Due to fall in offtake by steel mills, production falling sharply

* Production in 2016-17 and 2017-18 was around 27-28 mt

* Iron content in Karnataka is 58-60% according to steel mills, and 64% in Odisha, Chhattisgarh

* JSW’s Karnataka mine bought 18.62 million tonnes locally last fiscal, which fell to 1.5 million tonnes in April-May 

In all, NMDC produced 35.6 million tonnes last fiscal, of which Karnataka accounted for around 12 million tonnes. Nearly 80 per cent is procured by JSW Steel.

Basant Poddar, former Chairman and member, Federation of Indian Mineral Industries (Fimi), South said that importing ore will not help any players in the long-run. It will add to the cost as imports are carbon negative of about 500%. Iron ore grade in Karnataka is not inferior to Eastern India.

Why pay more for inferior quality, is the question that the steel industry is asking. 

READ MORE: Mining woes: Karnataka iron ore companies unable to clear stocks

Ramana Kumar, Secretary, Karnataka Steel Producers Association says suppliers (including NMDC), have deviated from pan-India uniform pricing to differential pricing and the user industry had no choice but to go for very low-grade material, which in any case is procured at substantially inflated prices. 

While accepting the fact the landing price of ore from other states is costlier than what is available in Karnataka, Seshagiri Rao, Joint MD & Group CFO, JSW Steel says looking at the inferior grade and poor availability, coupled with pricing premium, JSW has tried material from various sources, including imports and Odisha. 

"The benefits were tremendous and have had a very positive impact in terms of blast furnace production, lower slag volumes due to low impurities, lower fuel rates due to low alumina and consistent quality. Operations efficiency rose due to certainty of feed mix," says Rao.

This has resulted in significant savings which justifies the 'value-in-use' model that involves sourcing material outside Karnataka, as the ore from such sources is far better, he adds. 

READ MORE: Steel and mining companies still bearing the brunt of ban in Karnataka, Goa

While steelmakers urged NMDC and miners to reduce prices in line with other states, NMDC says, "The prevailing prices of NMDC's iron ore in Karnataka on landed-cost parity basis are competitive compared to imports and other domestic alternatives. Despite that, sourcing of iron ore from alternate sources by some major buyers is surprising and not justified."

NMDC hopes things will improve Q2 onwards, as the demand for finished and semi-finished products such as long, flat, pig iron and sponge iron has shown a positive trend the past two months. 

If there are no takers. miners say they will look at exporting the ore. They have knocked the Supreme Court's doors for clearance and the matter expected to come up next week.

Widgets Magazine

Sensex

Company Price Gain (%)
Coal India291.552.59
Axis Bank636.201.92
NTPC161.201.70
Sun Pharma.Inds.635.251.69
Wipro288.501.48

Poll

Currently No Poll Available.

Online Portfolio

You can create Online Portfolio here using the below button.

Widgets Magazine