The industry faced a unique paradox during the Covid-19 pandemic lockdown. From April to September, even as domestic production of iron ore slumped, exports have jumped, leading to shortage of raw material for local steel producers and putting livelihoods in jeopardy.
Multiple industry associations have written to PK Sinha, principal advisor to Prime Minister Narendra Modi, to ban exports of iron ore to make up of the shortage of the important raw material for steel-making in the domestic market.
The shortage has especially pinched the secondary steel makers, who don't have captive mines sourcing to their units, unlike the primary producers.
Associations, including Indian Chamber of Commerce (ICC) and All India Induction Furnaces Association (AIIFA), wrote to Sinha on September 25, highlighting the spurt in exports during the lockdown and after, from April to September.
They pointed out that domestic production of iron ore has slumped, not just leading to shortage of the raw material but also bumping up its price.
"Steel makers are forced to increase prices, passing on the hike in cost of production to customers, who are at a loss. Only China and the commercial miners are gaining," said a senior executive from the steel industry.
About half of India's annual steel output is produced by secondary steel producers. Unlike primary producers such as Tata Steel and JSW Steel, these units are much smaller in scale. They cannot compete against their larger peers when iron ore mines are auctioned.
Many of these secondary producers have sponge iron plants that need a constant supply of iron ore. Sponge iron is an intermediate product used in steel making.
"India had already started stepping up its iron ore exports since last year to bridge the global supply gap, as flows from the world’s two biggest producers – Brazil and Australia – were on a decline," AIIFA said in its letter to the Prime Minister's Office. Over 80 percent of the exports were to China.
The industry faced a unique paradox during the Covid-19 pandemic lockdown. Even as domestic iron ore production slumped by half to 47 million in tons in the April to September period, exports jumped by 63 percent to 22 million tons over the same time.
The industry associations said that many secondary units have been forced to shut shop, especially in Odisha and Chhattisgarh, which together have nearly 140 sponge iron units. Others are operating at half their capacity.
The executive quoted above added that the NMDC, the state-owned miner, "has an agreement to supply iron ore to Japan and Korea, with whom India has a free trade agreement, and is pushing around 3 million tons of iron ore per annum at throw away prices.""It is utmost important to ban the exports of iron ore for the survival of the secondary steel producers and help prevent huge job losses in the steel sector," the associations said.