Bhushan Power & Steel, Essar Steel & others forced to import iron ore due to falling domestic supply.

NEW DELHI: An ore carrier at Paradip Port is not considered an uncommon sight. Odisha is, after all, one of the country's biggest producers and exporters of iron ore - the critical input for making steel.

But 'Dimi', a supramax vessel berthed at Paradip till Sunday evening, was not like any other ore carrier. The ore it carried was from Vale in Brazil and meant for Bhushan Steel's plant in the eastern state, which accounts for a third of the country's iron-ore output.
"Selling iron to Odisha is akin to selling ice to Eskimos. Iron-ore imports on the eastern coast were unheard of yet," says the amused India head of one of the world's largest miners.

Faced with dwindling supplies and a country-wide clampdown on ore production due to illegal mining, steel companies are doing the unthinkable - importing iron ore to feed their plants. The imports, a trickle now, but which experts warn could easily turn into a torrent, threaten to increase India's dependence on overseas supplies of crucial mineral resources it owns in abundance.

Like coal, which is imported in vast quantities by power companies, the slow rise in imports of iron ore could erode the competitiveness of steel companies, and leave them at the mercy of wild swings in international prices and supply disruptions.

We are foreseeing a couple of years when India would be importing iron ore - it may not necessarily become a net importer though," said Prakash Duvvuri, senior analyst at Oreteam, a New Delhi-based mining consultancy firm.

Shipping industry and port officials in Paradip say another 150,000 tonnes of ore imports are expected soon to feed the state's ravenous steel mills. They, however, couldn't confirm the name of the buyer.

Bhushan Power & Steel, run by Sanjay Singhal, elder brother of Neeraj Singhal, who runs Bhushan Steel, has also been importing pellets from Bahrain and Ukraine. The unlisted firm is building a 2.3-million-tonne steel plant in Odisha. "The shortage of iron ore supplies in Odisha has forced us to import," rues Singhal.

Essar Steel, another steelmaker feeling the brunt of an acute shortage of the critical ferrous input, has been importing ore for the past few months, but on the western coast.

South African and Bahrain ores have been used to feed the company's facility at Hazira in Gujarat. "We have been importing iron ore for the past couple of months, but will be stopping now.

The depreciation of the rupee no longer makes it viable, although international iron ore prices are coming down," Essar Steel CEO Dilip Oomen said.

Essar's 8-million-tonne pellet plant in Visakhapatnam was fed by a slurry pipeline from NMDC's Chhattisgarh mine. That has run dry after being damaged in a Naxal attack last October, and some iron ore is now being supplied through rakes.

"There is an acute shortage; prices of what's available are being hiked in the run-up to the rainy season," said the iron-ore head of another steelmaker in the east, whose raw material requirements are only partially covered by a mine next door in Jharkhand. Companies such as JSW and Welspun in Gujarat, and even a few Surat-based traders on the western coast, have been known to import pellets occasionally.

But those were small quantities and nowhere close to the large orders being placed now. Officials close to the big miners such as Vale and Rio Tinto say there is a surge in enquiries. One of Australia's largest miners is said to have received enquiries from India even for iron or fines, which, till recently, India exported in abundance to China.

India's domestic iron-ore production has dropped sharply after the Supreme Court ordered mines in Karnataka to shut following a crackdown on illegal mining. Similarly, the Odisha government's clean-up measures have dramatically reduced supply.

As per ministry of mines data, provisional iron-ore production is expected to fall from 208 million tonnes in 2010-11 to 170 million tonnes for 2011-12. Odisha's output will be cut by 10 million tonnes to 67 million tonnes. Paradip, which exported 13 million tonnes in 2010-11, is expected to export only about 5.7 million tonnes now.

Source : economictimes.indiatimes.com