Trouble for steelmakers: Jharkhand orders closure of 12 iron ore mines

Jharkhand has ordered the closure of 12 out of its 17 iron ore mines because their leases have expired, dealing a fresh blow to local steelmakers, some of which have been forced to import the raw material due to short supplies at home.

Mining curbs in India in states such as Goa and Karnataka along with mine closures in top producing Odisha have limited iron ore availability in the country, opening the door to more imports this year, which could help absorb some of the surplus in global supply.

Jharkhand was India’s third-biggest iron ore producer in the fiscal year to March, with output of around 21 million tonnes. The shut mines, including those of steel majors Tata Steel and Steel Authority of India Limited (SAIL), accounted for around 19 million tonnes.

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[caption id=“attachment_77815” align=“alignleft” width=“380”]  Representational Image of Iron Ore. Reuters[/caption]

“They have sent notice to close 12 mines. These include mines of Tata Steel and Steel Authority of India Limited,” an official of the Jharkhand state government said by phone from the capital Ranchi.

The notice was issued last week, he said, declining to be named because he was not authorised to speak to the media.

Asked when the mines would resume operations, the official said: “It depends on the government’s policy.”

Another official from the state government confirmed the mine closures.

In May, the Supreme Court ordered the temporary closure of 26 out of 56 operating mines in Odisha, also due to non-renewal of mining leases.

Eight of those mines in Odisha have since reopened, including the captive mines of Tata Steel, SAIL and state-owned Odisha Mining Corp, said Dhruv Goel, managing partner at industry consultancy SteelMint, based in Odisha.

SAIL produces 10-11 million tonnes of iron ore annually in Jharkhand and Tata Steel around 5 million tonnes, Goel said.

He estimated that both steelmakers had iron ore stocks that could probably last them around 40-45 days.

From 300,000 tonnes in the past fiscal year, India’s iron ore imports would probably reach 6-7 million tonnes in the current year to March 2015 due to the mining restrictions, said Goel. Imports had already reached 2.6 million tonnes in April to August, he said, citing government data.

That could help siphon off some of the surplus in the world market that has slashed iron ore prices by nearly 40 percent this year as big Australian and Brazilian miners have lifted output and demand has slowed in top buyer China.

Reuters