India’s iron-ore output bounces back but policy uncertainty resurfaces

KOLKATA (miningweekly.com) – Indian iron-ore production bounced back to positive territory, recording growth of 8% during 2015/16, and is forecast to increase by 29% in the current financial year, despite policy uncertainty looming over the sector.

Data sourced from the Steel Ministry shows that Indian iron-ore production hit the 139-million-ton mark in 2015/16. The recovery during the year was significant, considering the six-year production low of 128-million tons in 2014/15.

Barring 2013/14, when iron-ore production was positive, Indian iron-ore production has persistently declined, with 2011/12 registering a 20% contraction, followed by a 19% contraction in 2012/13 and a 15% contraction in 2014/15.

Provisional production estimates for the current financial year show iron-ore production is expected to increase to 180-million tons, with officials claiming that the final figure could be even higher, as several provinces are ramping up production and many of them, such as Odisha, are seeking a relaxation of the yearly production ceiling imposed by the Supreme Court.

Citing examples to back such a claim, an official pointed out that Odisha’s production of 80-million tons in the last financial year was at a ten-year high.

Similarly, in western India, miners in Goa are seeking a relaxation of the 20-million-ton-a-year production ceiling, with Vedanta leading the charge for a relaxation of the restrictions. Vedanta is not allowed to produce more than five-million tons a year, but has already extracted about three-million tons in the current financial year.

Meanwhile, the sustainability of India’s iron-ore turnaround is unclear, owing to a failure to reconcile conflicting claims about the country’s export future.

The debate got a fresh lease on life last month with the Steel Ministry indicating that it is willing to engage the Finance Ministry on a pending proposal to prune the export tax on iron-ore fines and lumps.

While the government has slashed export tax on low grade iron-ore fines to 10%, a higher rate of 30% was maintained for all other grades despite repeated pleas of miners for a reduction to maintain the momentum of revival.

Quick to nip any such move in the bud, the Indian Steel Association, the representative body of domestic steel producers, has in a communication to the Ministry, demanded that the higher rate be maintained to “preserve natural resources for domestic use and ensure adequate raw material security, keeping in view long-term growth plans and investments in domestic steel capacity growth”.

Making a case against easing exports, steel companies have pointed out that over the past five years, steel production has registered a compound annual growth rate (CAGR) of 6.5% while the CAGR of iron-ore production during the same period was a negative 6.51% indicating dire long-term availability of the critical raw material.

For their part, miners represented by the Federation of Indian Mineral Industries (FIMI), said that after becoming largely a minor player in international markets, Indian iron-ore needed fiscal support from the government to mark a renewed presence among global buyers.

FIMI claimed that higher exports would not result in scarcity now or in the future. On the contrary, higher exports would lead to higher production and higher exploration and discovery within the country.