As a principal supplier of minerals, NMDC plans to scale up its production. While full details are not available, there are possibilities for a spin-off to take care of the steel plant at Chhattisgarh along with all the iron ore operations
Iron ore prices in global markets have been coming down drastically in the last few months, more due to the economic run down in China and their slow off take. At one time, the iron ore price was around $92 per tonne and because of the steep fall in demand, ore with 62% content, delivered to Qingdao, China, has dropped to $68.99 per tonne, as per the Metal Bulletin Ltd.
In a recent televised press conference, Australia's treasurer, Joe Hockey, is reported to have stated that they forecast the iron ore prices to hover around $60 a tonne. The decline in price of ore, which was ruling at $92 has had a great impact on the Australian budget. It has resulted in a fall of about 15% in thermal coal also.
In so far as India is concerned, iron ore exports had come to a standstill with more than three-fourths of mines lying idle due to a Supreme Court ban, which has been lifted in stages, and slowly the mining operations are in the process of resuming. According to a Parliament reply, by Minister of State for Steel and Mines, Vishnudeo Sai, on 1st December, out of 776 mines in the country, 590 are closed. All the 330 mines in Goa are shut and out of 143 mines, 112 are not operating in Odisha. As a result of this, the steel industry giants such as JSW Steel and Tata Steel are expected to import as much as 9 mt and 2 mt respectively this year.
Mines that are in the clear will be able to produce around 130 million tonnes (mt) of iron ore and the demand is expected to exceed 140 mt, resulting in the import of 10 to 15 mt in 2015.
In the case of Tata Steel, mining lease given to them in Jharkhand has now been conditionally renewed and in a similar fashion, thanks to the interim order issued by the High Court, they would be able to ramp up their production of both iron ore and manganese in Odisha. Because of the closure of the captive mines, Tatas would have to import the iron ore as stated above.
As a principal supplier of minerals, NMDC plans to scale up its production, as reported in the press, to double its output by 2018-19. Narendra Kothari, CMD of NMDC has stated that the production target of 31 million tonnes of iron ore in 2014-15 will be met and their plans are to reach the targets of 60 mt by 2018-19 and 100 mt by 2024-25. Their plans include enhancing production from existing mines as also opening up new mines, such as Deposit-11 B in the Bailadila sector of Chhattisgarh and Kumaraswamy in Donimalai sector in Karnataka. Within 3 to 8 months, these are expected to add 14 mt to the current output of 30 mt.
In addition to these, NMDC's 3 million tonnes steel plant at Jagdalpur is expected to be ready by December 2015 and production to start by 2016. This will be a major achievement for them in Chhattisgarh. This will be in addition to their joint venture in Jharkhand with the Jharkhand State Mineral Development Corporation in their projects at Sasangada and Ghatkuri.
Therefore, the media report on NMDC setting up a separate operation to deal with iron ore makes interesting reading. While full details are not available, does this mean, there are possibilities for a spin off to take care of the steel plant at Chhattisgarh along with all the iron ore operations? If such a move happens, it will be rewarding to its shareholders. After all, NMDC holds as much as 1300 million tonnes of known high quality iron ore reserves, both in Karnataka and Chhattisgarh. As of March, 2014, the cash reserves of NMDC amounted to Rs18,800 crore. It would be interesting to follow this matter as it develops.
has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)