Moneycontrol
Last Updated : Jun 13, 2018 07:13 PM IST | Source: Moneycontrol.com

It's steelmakers against miners in Karnataka over iron ore

While miners allege that their stock is piling up as steel companies buy ore from outside the state, steelmakers say that NMDC is asking for a higher price

Prince Mathews Thomas @prince0879
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Prince Mathews Thomas

Moneycontol News

A war of sorts has broken out between miners and steelmakers in Karnataka over iron ore sales and prices.

A few days after FIMI – the industry body representing miners like the state-owned NMDC – alleged that steelmakers in the state were buying iron ore from outside Karnataka, steel companies have put the blame back on their mining counterparts.

Miners, led by NMDC, have taken the matter to the central government, complaining that their stocks are lying idle, even as steelmakers buy iron ore from neighbouring states like Odisha and Chhattisgarh, or import from abroad. The miners have asked the government for permission to export the ore, as presently they are not allowed to sell mines outside the state.

But steelmakers have a different view. “Since 2016, NMDC, which produces almost half of the state's output of 25 million tons, has been following a differential pricing policy, leading to a higher price of iron ore in Karnataka," Seshagiri Rao, Joint Managing Director & Group CFO, JSW Steel, told Moneycontrol.

Officials from the industry add that NMDC's iron ore in Karnataka is priced Rs 700 per ton higher than the one in Chhattisgarh, and Rs 2,000 a ton higher than the rate in Odisha.

"Moreover, iron ore found in Karnataka is inferior and companies need to spend more in beneficiation of the ore.  On the other hand, ore from Odisha or the imported one, gives us a gain of Rs 2,000 per ton, despite the additional logistics cost," Rao added.

A mail sent to NMDC remained unanswered.

Demand-supply gap

Karnataka is one of main iron ore mining states in the country, along with Chhattisgarh and Odisha. But with increasing instance of illegal mining, the Supreme Court had banned ore extraction in the state in 2011. The ban was lifted in 2013, and since then the mining limit has been raised to 35 million tons a year. The last hike came in December last year.

The ban led to a demand-supply gap, and steelmakers allege that the miners made the most of it. “NMDC deviated from the previous norm of uniform pricing across the country and resorted to differential pricing.

“KISMA, which represents those who buy iron ore, had made several representations to NMDC to address this concern, but it made no difference,” said an official from the steel industry.

KISMA had earlier also approached the Supreme Court and the CCI, but got a unfavourable ruling.

Low grade

The steel industry is also miffed that they were asked to pay a higher rate for ores of lower grade.

Of the three major iron ore mining states, Karnataka has the lowest quality of the raw material. “But the miners continue to ask for higher rates.”

JSW Steel has over the years sourced ore from other sources, including from neighbouring Odisha or imported from overseas markets.

Sources from the industry added that some of the private miners have corrected prices, but not NMDC.  “Contrary to this, NMDC further increased the prices earlier this month,” alleged a steel executive.

“While private miners now sell up to 90 per cent of their production, NMDC’s utilisation is down to 20 per cent of production,” said an official.
First Published on Jun 13, 2018 07:13 pm
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