Steel Industry body, Indian Steel Association has written to the prime minister’s office seeking a temporary ban on iron ore exports to ease domestic supply and bring down the prices. “A temporary ban of Iron Ore export for a 6-month period till the situation stabilizes is the need of the hour. This will help the domestic steel industry by increasing the availability of Iron ore in the country,” said ISA’s secretary-general, Bhaskar Chatterjee in a letter addressed to P. K. Mishra, principal secretary to the Prime Minister, dated 27th of December.
The only comparative advantage Indian steel Industry has over its global peers is the availability of local iron ore. Unfortunately, the acute shortage of iron ore aggravated the problems of the Indian steel industry further affecting the steel production, Chatterjee said. The Indian steel industry is currently facing very testing times as the iron ore supply has been badly squeezed and at the same time, the prices of iron ore have shown an unprecedented rise in both national and international markets, added Chatterjee.
“The limited supply and rising prices of iron ore, which is the basic raw material for making steel, has also led to high steel prices,” Chatterjee said. In the past few weeks several steel-consuming industries like the engineering exporters, forging industry bodies have raised voices against the sharp price hike in the market and have urged the government to intervene. According to analysts, domestic hot-rolled coil prices are quoting at a two-year high of Rs 49,000-50,000 per tonne. Supporting the current steel price hikes, the industry body said that the Indian steel prices even though has gone up is still at a discount to that of international prices. “As India is an open economy, the steel prices in India move in sympathy with the international prices,” Chatterjee said.
The primary reason behind the adjustment of prices has been on account of the sharp rise in the main raw material cost which is iron ore and its overall shortage besides surging global steel prices, the letter said. NMDC a PSU Company has increased prices of iron ore lumps (0-10 mm Fe 64 from Rs 1960 (as on 15th June 2020) to Rs 4610 per ton (as on 22nd December 2020) in the last six months. The increase is 135 per cent.
“Each Rs 1000 increase in iron ore prices impacts the minimum Rs 2000 per tonne in steelmaking,” Chatterjee said. As per the industry body, iron ore production in April to October 2020 was at 92.08 million tonnes and has witnessed a sharp de-growth of 30 per cent over the same period last year. Odisha contributes over 50 per cent of the country's annual iron ore output. In the first five months of the fiscal year, i.e., for the period April to August 2020, the Odisha iron ore dispatches have been roughly 15 million tonnes, a fall of nearly 60 per cent compared to the 35 million tonnes in 2019.
“The shortage in Odisha has been mainly on account of the change in hands of the expired iron ore leases and numerous evacuation issues,” The letter said. The industry body also highlights that the export of iron ore has jumped by 70 per cent during the same period of a shortage in the domestic market, and around 92 per cent has been to China. “On the export front, we find that Indian Iron ore exports have surged 70.3 per cent to 29.2 million tonnes in the first half of the current fiscal compared with the corresponding period a year ago,” the letter said.
About 92 per cent of the exports were directed towards China during this period - the very period during which Indian and China had a violent border standoff in eastern Ladakh and when Chinese products were subject to a barrage of restrictions including the ban on apps, Chatterjee added. “Implement quick policy measures for easing the supply of Iron ore situation, especially Odisha, where the State Government miners, like OMC and IDCOL, may be directed to prioritise supply to domestic end-users over exporters by limiting the daily tonnage to exporters and diverting the major quantity to domestic steel manufacturers,” Chatterjee said in the letter. In addition to policy changes, ISA urged the government to restrict e-auction of iron ore by OMC, OMDC and IDC for the end-users in India either for Pellets or Steel manufacture.