Crisil Research said they “expect the domestic iron ore supply scenario to gradually improve over the medium-term and come back to an even keel, but even then it is highly unlikely that the industry will recover in a hurry [to] the exporter status that it enjoyed in its heydays. The days of unbridled profits are perhaps over.”
Writing in The Hindu, the director of CRISIL Research, Ajay Dsouza, explained that new, fairer and more transparent norms for iron ore mining were now being put in place in many states of India.
During the last decade, India’s iron ore miners became important global players in the export market, particularly China, he said. In 2009-10, India was the third-largest exporter of iron ore, next only to large global miners such as Vale, Rio Tinto and BHP Billiton.
To meet the huge burgeoning demand, particularly from powerhouse China, many domestic players capitalized on liberal government policies during the early 2000s and bought or leased new mines at relatively cheap prices, expanded production capacity, and smiled all the way to the bank as profits skyrocketed.
“But the sheen quickly came off the industry and the smiles were wiped off as allegations of illegal mining, under-reporting and skimming away of profits to the detriment of the government treasury surfaced in Karnataka in 2010,” wrote Ajay.
For the industry, the double whammy of the mining ban and a sharp increase in export duty on iron ore fines (currently 30 percent) killed its golden goose: exports.
The new transparent norms for iron ore mining now being put in place in many states should be visible in Karnataka sometime during the course of this year, in the form of improved supply, he added.
Sohrab Darabshaw contributes an Indian perspective to MetalMiner.