Iron ore miners in Karnataka, facing uncertainty over possibility of exports in the near future, are increasingly looking at new opportunities to earn higher profits. A large number of miners is exploring the possibility of diversifying into manufacturing and export of pellets, because of the absence of any duty on pellet exports.
At present, the demand for pellets in India is estimated at 37 million tonnes per annum (mtpa) and is projected to double to 76 mtpa by 2016-17. The pellet-making capacity is likely to double to about 30.3 mt in Karnataka over the next three years. Currently, seven pellet-making plants are operating in the state with an installed capacity of 15.4 mt. These include KIOCL, MSPL, Xindia and BMM Ispat.
In addition, JSW Steel has a pellet plant with a capacity of eight to nine mtpa. Karnataka currently contributes about 36 per cent of the national production of pellets. About 14 new pellet plants with a combined capacity of about 15 mt at an estimated investment of Rs 4,000 crore are in various stages of implementation in the state. Mineral Enterprises, KEJ Minerals, RBSSN Ferrous Industries, Doddannavar Nanjinzhao Mining and Metallurgy, Shree Renuka Energy, VSL Mining Company, Kalavati Ispat & Power and Concast Infrastructure are setting up new pellets plants in Karnataka.
“For miners in Karnataka, it makes sense to export pellets, because they cannot export iron ore for now. Also, by exporting pellets miners can earn about $12-15 extra per tonne as the realisation is higher than iron ore,” Basant Poddar, vice-chairman, Federation of Indian Mineral Industries (FIMI), South, said.
Currently, pellets earn an export price of $153-155 per tonne (cost and freight) in China as against $138 per tonne (cost and freight) for iron ore of 63 per cent Fe grade. Export of pellets from India is likely to increase considerably. India’s export of pellets in 2010 stood at 3.7 mt. KIOCL, JSPL and Mandovi are the leading exporters of pellets from India.
The national production of pellets stands at 42 mtpa and another 32.5 mtpa capacity is under implementation. Fresh memorandums of understanding signed for setting up new plants amount to 51.9 mtpa. While the total demand for pellets in India stands at 37 mtpa, the balance is exported. The government had exempted pellet exports from export duty during the last financial year.
“In the existing scenario in Karnataka, miners appear to have accepted that exports may not be possible for some time. Till then they need to find an alternate means of income. Compared to integrated steel mills, the capital requirement to set up pellet plants is quite small and the final product (iron ore pellets) can be easily sold, either to domestic steel mills, DRI plants or even exported, if the price is right,’’ Prakash Duvvuri, senior analyst at OreTeam, a New Delhi-based mining consultancy firm, said.
Pellet plants can be as small as 0.8 mtpa and an investment of close to Rs 200 crore is required to erect and set these running, he pointed out.
He added several miners were looking for joint venture opportunities in technology besides finance from Chinese companies.