On July 29th, in an effort to prevent further environmental degradation, the Supreme Court of India imposed a ban on all iron ore mining in the Bellary district of Karnataka, SW India, effective immediately.

Gunmeet Singh, CRU’s lead steelmaking raw materials analyst in India reports that The Ministry of Environment and Forests (MoEF) has been directed to submit a report by August 5th, which reviews both India’s iron ore requirements and the supply of iron ore from the Bellary district (breaking this down by domestic and export shipments).

The Central Empowered Committee (CEC) has also been asked to submit an Environment Impact Assessment (EIA) on mining in the Tumkur and Chitradurga districts of Karnataka, within a period of three weeks.

Bellary is the main iron ore producing district in Karnataka. In fiscal year 2010/11, Karnataka produced almost 38Mt of iron ore, of which 25Mt (66%) was from Bellary. Iron ore production in Karnataka fell in fiscal year 2010/11 from the previous year’s level (of approximately 45Mt) owing to the State’s ban on iron ore exports, which was announced in July 2010. While this ban on exports was removed in April 2011, the non-issuance of transport permits has meant that iron ore exports from Karnataka have, in reality, remained pretty much non-existent ever since.

The order to ban mining followed a report by the CEC, which examined allegations that illegal mining was damaging the environment of the region. The Committee reported rampant illegal mining and widespread ecological devastation in the area. According to the report, over 90% of the forest area within the district has become highly degraded as a result of indiscriminate mining.

Two days prior to the Supreme Court’s decision, the Karnataka Lokayukta, a quasi-judicial body, issued a report exposing the activities of businessmen and politicians engaged in illegal mining. Friday's ban was however, based upon the CEC’s findings, rather than those of the Lokayukta report.

The impact of the ban
Given that iron ore exports have, even since the removal of the export ban in April 2011, remained pretty much non-existent, the largest impact of last Friday’s order to ban iron ore mining in Bellary will be on domestic steel mills, pig iron plants and sponge iron plants, particularly those based within Karnataka State. As a consequence iron and steel companies will have to cover any shortfalls in ore requirements through increasing their purchases from other domestic iron ore mines. The impact of this will be:
– higher iron ore prices within India;
– a further reduction in the availability of Indian iron ore for export; and
– upward pressure on international iron ore prices.

Jindal South West (JSW) at Bellary will be the company most affected as annual ore requirements for its 10Mt/y steel plant are 23.5Mt. Other plants affected within Karnataka State will be BMM Ispat sponge iron plant (3.8Mt ore), Kudhremukh Pellets (3.5Mt ore) and MSPL pellet plant (1.1Mt/y), along with 13 other smaller producers. Total ore demand from all these plants is 39Mt/y.

Some 13Mt of the ore is supplied to plants outside of Karnataka, JSW Ispat Dolvi in Maharashtra receiving 5.5Mt and JSW Steel Salem in Tamil Nadu taking 1.65Mt.

In the past two years, the State of Karnataka has attracted proposals for steel projects totalling up to 57Mt/y capacity and worth $55bn in investment as a result of the active support of the State government, delays in approving projects by the competing ore rich states of Orissa, Jharkhand and Chhattisgarth in NE and Central India, and because of its substantial ore deposits. (Download Steel Times International July/August 2011 p 39) http://www.steeltimesint.com/contentimages/features/KarnatakaSTIJulAug.pdf