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Even as iron ore output in India’s top producer Odisha slipped by 18 percent, the steel companies have started importing pellets to meet their raw material requirement.
Iron ore production came down by nearly a fifth to 60 million tonne during 2011-12 against 73 million tonne reported in the previous financial year. This was due to less evacuation of the iron fines stacked at the mines pit head, said the industry sources.
“Because of sharp hike in export duty along with higher rail freights amid poor global demand, the miners are unable to evacuate the fines and thus production is getting affected in Odisha,” R K Sharma, secretary general of Federation of Indian Mineral Industries (FIMI) said while speaking about raw material availability to steel units.
Due to supply problems of iron ore lumps, which can be directly fed to steel plants to produce steel, some manufacturers have started buying pellet from outside.
Recently, Bhushan Steel imported 55,000 tonne of iron ore pellet from Brazil. It is waiting another vessel with a load of 23,091 tonne pellet by 12 June. Similarly between February and April, Steel Authority of India (SAIL) ordered 157,750 tonne of iron ore pellet from Mangalore plant of Kudremukh Iron Ore Company Ltd (KIOCL) through Paradip port.
SAIL procured the cargo for its Bokaro plant, sources said.
“It is hard to say how much pellet import order has been placed, but surely they (steel plants) need it because of lower supply of iron ore lumps. So unless mining activity picks up in the state, pellet imports will rise,” an official with a large shipping agency said.
Unlike the lumps, fines (the powdery form of ore) cannot be used directly by steel makers and can only be consumed after converting it into pellets. Fines are produced along with lumps during mining.
India produces about 200 million tonne iron ore every year, out of which more than 60 per cent are fines. Since it does not have the technology to convert iron ore fines into usable commodity, most of it are shipped to China to be used in steel mills there with the help of advanced technology.
However, the recent government decisions to discourage exports amid non-availability of pellet-making industry only belie the logic, said FIMI's Sharma. “Pellets imports will only rise if the government does not come up with perfect solution,”he added.
Meanwhile, the Indian government, perturbed by rising steel demand amid diminishing deposits, imposed tight restrictions on the iron ore exports to support the domestic need. Finance Minister Pranab Mukherjee in the last budget had proposed to slash basic customs duty on plant and machinery imported for setting up of iron ore pellet plants or beneficiation plants from 7.5 per cent to 2.5 per cent.
During a recent review of the status of steel projects in the state, Odisha government said it has received at least 20 proposals to set up iron ore beneficiation and pellet units. It may be noted that Essar Steel has already commissioned its six million tonne per year pellet plant at Paradip.