India to incentivise consortiums to build iron-ore pellet plants...

India to incentivise consortiums to build iron-ore pellet plants


21ST SEPTEMBER 2018

BY: AJOY K DAS
CREAMER MEDIA CORRESPONDENT
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KOLKATA (miningweekly.com) – India’s Mines Ministry is exploring ways to incentivise private merchant iron-oreminers to form consortiums to construct pelletisation plants in mineral bearing states, in view of a changing raw material preference of steelmills worldwide, particularly in China.
Government companies like KIOCL (formerly Kudremukh Iron Ore Company Limited), steel producer, Rashtriya Ispat Nigam Limited (RINL) and Steel Authority of India Limited(SAIL) have all been nudged to invest in constructing new iron-ore pellet plants.

However, with total iron ore pellet volumes available for overseas shipments still limited with bulk of exports done by KIOCL, the Mines Ministry is seeking ways to incentivise smaller merchant iron-ore miners to pool their low grade fines production, Ministry officials familiar with the initiative said.
The government’s plans to push miners into higher production of pellets was triggered by the development last month when small and medium iron-ore miners in southern Indian province of Karnataka announced a consortium company to set up an one-million ton a year pellet plant as low grade iron-ore fines produced in the region was finding few takers among domestic or overseas steel mills.


It was pointed out that globally steel mills were either preferring high-grade iron ore lumps or pellets, which were commanding a premium in international markets. Chinese steel mills, the largest buyers of the raw material from Indiatoo were lowering off-take of high grade iron-ore fines (FE content 62% and above) in face of stricter imposition of pollution control laws.
Faced with downtrend in exports of fines, Indian merchant miners would also benefit from moving with the trend and focus in increasing pellet production which had a nil rate of export tax in contrast to a 30% export tax on high grade iron ore fines and lumps.
Officials, however, acknowledged that the government would not be in a position of offer fiscal incentives but incentivisations could include offers of subsidised land and infrastructure, special funding windows to raise debts from financial institutions and differential rates for transportations charges.
Besides pushing higher volumes of raw material overseas, merchant miners’ export realiaations would also see a significant upside to shipping high grade fines.
Citing examples, the officials said that early this month, shipments of pellets by KIOCL fetched an average $149/ t on a FOB basis, at a time when high-grade iron-ore fines were being shipped at around $70/t CFR China. This compared to a domestic price of iron-ore pellets averaging around $114/t from plants in southern India.
However, the final outcome of government thrust to enable miners to construct pelletisation plants would depend on the Indian Supreme Court, which was currently hearing a case seeking permission of export of iron-ore pellets from Karnataka. The court had earlier imposed a production ceiling of 35-million tons a year for all operational mines in the southern state.
At present, total Indian iron-ore pellet production capacity is around 85-million tons a year with capacity utilisation ranging between 50% and 60%.