Iron Ore Pellet Production: Moves Being Made, But Endgame Long Way Off

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Last week MetalMiner wrote about how iron ore miners are now resorting to iron ore pellet production in the face of a tough demand and export environment — here are Part One and Part Two — but, as in all bureaucratic dealings in India, how long will this take?

In Odisha, the Industrial Infrastructure Development Corporation of Odisha (IDCO) had given administrative approval for acquisition of 21 acres of land in the Keonjhar district for establishment of an iron ore pellet plant having a capacity of 300,000 metric tons per year. The plant will be set up by Keonjhar-based Kashvi International (Private) Limited, engaged in iron ore fines export since 2009.

Others reported to be in the running for the setting up of pellet plans are MGM Minerals, Brahmani River Pellet Ltd (BRPL), a unit of UK-based mineral trader Stemcor Group, and Essar Steel.

Iron ore pellets are formed out of powdery iron ore fines, and are used as an alternative to iron ore lumps, which can be directly fed to blast furnaces.

It is expected that a majority of the pellet plants would take at least five years to be completed, but the amount of additional capacity would be huge. One government official was quoted as saying Odisha itself would end up producing 30 million tons annually by 2017.

A few months ago, the current president of India, Pranab Mukherjee, who was then the country’s finance minister, had announced that the government was planning to reduce import duties on pellet plant equipment. The minister had proposed to slash basic customs duty on plant and machinery imported for setting up of iron ore pellet plants from 7.5 percent to 2.5 percent. We’re awaiting further word on that.

However, still upset over the high export duty, the Mines Ministry has decided to get into the act at last. According to another report in the Business Standard, it had proposed a rollback on the duty as it was affecting production and availability.

The Mines Ministry, in its note to the Finance Ministry, has pointed out that international prices had come down to US $111 per ton from the $172 per ton in August last year. Added to this was the fact that the government had increased freight charges, so also the export duty.

Also, the limited storage of the iron ore fines was adding to the miners’ woes, making a strong case for a duty rollback.

Sohrab Darabshaw contributes an Indian perspective to MetalMiner.

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