One of the uncertainties facing iron ore miners in India has been the ban on mining in Karnataka’s ore-rich belt. On Monday, the Supreme Court (SC) accepted the report of the central empowered committee (CEC), a court-appointed expert group, and allowed resumption of mining in Category-A mines. Investors appeared cold to the development, as mining stocks did not move much after the news.

This is only the beginning of a long remedial process, a factor that investors are painfully aware of. Category-A mines are those with little or no irregularities, and 18 in the category can start mining after obtaining statutory approvals with a cap of 6.96 million tonnes (mt). Of these, one mine is unwilling to obtain approval and five more are not eligible to start for other reasons. The net production that can potentially come into the market, therefore, is 4.5 mt.

Also, there are restrictions on the level of production. The CEC report mentions that of the 32.4 mt that can be mined under these 21 mining leases (including three Category-B mines that are not being considered for mining approvals at this stage), the approved rehabilitation and reclamation plans are allowing only 10.3 mt (6.96 mt from Category-A and 3.34 mt from Category-B).

The Supreme Court has fixed an upper ceiling of 25 mt for the Bellary district, and 5 mt for Tumkur and Chitradurga districts.

Iron ore production in the Category-A mines will resume gradually, after obtaining pending statutory approvals. This will release some more iron ore into the market, offering some relief to steel makers. In happier times, this might have seen a positive reaction, but gloomy times for steel producers—both in India and abroad—may have neutralized their enthusiasm.

Resumption of mining should also cheer mining companies such as Sesa Goa Ltd, whose mines are included in Category-B leases. But the gloom in steel has hit iron ore prices, too.

Chinese imported iron ore prices have fallen by 24% in August and by 50% from the year-ago period, while Chinese domestic flat steel prices are down by 8% in August and by 29% from the year-ago period. Having more iron ore in the market does little to cheer investors in these circumstances.

Close