Odisha mining order to hit sponge iron output, says trade body

Last Updated: Tue, Dec 11, 2012 03:50 hrs

The recent clamp-down on miners by the Odisha government, the largest producer of iron ore in the country, is likely to affect India’s sponge iron production by around 15 per cent in the current financial year, according to the Sponge Iron Manufacturers Association (Sima).

“Since Odisha is the largest producer of iron ore and sponge iron, the recent measures taken by the state government will surely impact on (the country’s) sponge iron output. In 2011-12, the output was around 20 million tonnes (mt). We expect this to drop by 15 per cent in 2012-13,” said Deependra Kashiva, executive director of Sima.

Apart from shutting down a couple of hundred mines for want of forest and environment clearance in 2009, the Odisha government, through an executive order in October this year, forced several large merchant iron ore miners to halt production till their lease renewal application got through. The order resulted in monthly production fall of about two-three mt, trade estimates said.

Between 2010-11 and 2011-12, iron ore output in Odisha declined from 73 mt to 60 mt, provisional government data showed. In the current financial year, the output is likely to drop heavily because of the recent order, miners said.

“The decision to halt the mining activity till the processing of lease renewal in Joda and Koira mining circles will wipe out 20-22 mt annual iron ore output of Odisha,” said R L Mohanty, chairman of the Eastern Zone Miners Association.

There are about 146 sponge iron plants and 29 partially commissioned integrated steel plants in the state, all of which depend upon iron ore supplies from the Joda and Koira circles--which account for a fourth of India’s total annual production.

Due to shortage of locally produced iron ore, several sponge iron units are currently running at just 25 per cent capacities since the last few months, while many smaller plants have shut shop.

Until September 2011, Odisha was producing six-mt sponge iron a year, the highest in India. In the current financial year, it is that the output would fall below three mt.

As production dwindled in Odisha, sponge iron buyers switched to Chhattisgarh, where the mineral supply situation is slightly better, according to traders.

“It’s true that some buyers have switched to the Chhattisgarh market in the absence of Odisha products, but it did not translate into significant improvement of sponge iron trading volume in Chhattisgarh. The demand situation is not the same as it was expected after production fall,” said Rajesh Wadhwa, a sponge iron trader based in Champa, Chhattisgarh.

Sponge iron is produced from iron ore lumps or fines by reducing the oxygen content from it using either natural gas or coking coal as fuel. Induction furnaces use sponge iron to produce long steel products primarily, which are used in construction.

More from Sify: