India’s Steel Ministry mulls capacity utilisation floor for iron-ore mines

KOLKATA (miningweekly.com) – Failing to muster support even within the government to cap the domestic price of iron-ore, India’s Steel Ministry is now mulling a proposal to set minimum capacity utilisation benchmarks for iron-ore mines across the country.

Sources in the government say the Steel Ministry aims to focus on the supply side by setting minimum benchmarks for capacity utilisation to ensure adequate supplies of raw materials to domestic steel mills.

This is after a proposal focusing on setting a price band within which miners will have to keep iron-ore prices failed to secure support within the government, including the Mines Ministry, the sources add.

A committee has been appointed within the Steel Ministry to finalise the details of such a mechanism and has been directed to submit a report within the next month.

Although the details are yet to be worked out, it has been suggested that miners will be liable for a penalty if capacity utilisation levels fail to meet the government-set benchmarks.

Another provision on the table is to empower the government to force miners to liquidate pithead iron-ore stocks either beyond a specific volume or within a timeframe.

However, even before the fine print of the Steel Ministry move has been set, private iron-ore miners have come out opposing such control.

According to a private iron-ore miner in the eastern Indian province of Odisha, controls on capacity utilisation are not only “impractical”, but also “reflect the absence of understanding of mining dynamics within government official circles”.

It was pointed out that even within one specific mining lease hold, iron-ore production can range from lumps to fines and varied ferrous content percentages. The demand for iron-ore also varied from steel mill to steel mill, depending on respective ferrous content requirements, while demand also varied between demand emanating from user industries like sponge iron or pelletisation units, the miner says.

He adds that it will be almost impossible to lay down one single combined production capacity utilisation rate for all grades of ore and that it will risk the possibilities of one grade piling up at the pitheads for which demand may be low in any given period.

Another miner said the imposition of minimum production criteria on miners would be discriminatory as significant volumes of iron-ore were also accumulated by aggregating traders and other market participants, and stockpiled at either pitheads or port stockyards until export transactions were concluded; hence, limits set on miners would not as a corollary result in higher supplies to domestic steel mills.