BS reported that the closure of mines in Karnataka’s Bellary-Hospet region has started hitting the downstream sector. Around 5,000 foundry units and a similar number in the sponge and pig iron sector have been facing a big shortage of iron ore supply. The foundry sector makes key equipment for the auto and engineering industries.
Following a Supreme Court order about two months earlier, private mining of iron ore in Karnataka has been suspended. Downstream sectors such as foundries are, therefore, facing a big shortage of supply of quality pig iron, the key raw material for all major auto and engineering grade foundries. The frequent rise in interest rates by banks is another problem for the foundry sector.
Bellary-Hospet is known for high-grade iron ore, not available in abundance elsewhere in the country. Karnataka produces nearly 30% of India’s yearly output of 220 million tonnes of iron ore.
Mr AK Anand director of The Institute of Indian Foundrymen said that “Steel and other metallurgical industries are severely affected.”
Mr C Nagarajan a National Council member of IIF said that “Foundry units are facing problems from both sides lower realization and high cost of production due to a dramatic spurt in interest rates for their working capital.”
Interest rates have risen by 4% in the past six months and raw material prices by 15 to 20%.
According an estimate, about 500 small and independent sponge iron units, largely in Chhattisgarh, Gujarat, Tamil Nadu and West Bengal, are facing a closure threat due to non availability of ore.
The shortage of ore has already started begun impacting steel and other downstream producers. Sponge iron prices first shot up to INR 24 a kg when the mining ban in Bellary-Hospet was announced. It then cooled, to the current INR 22 a kg.
Mr Amitabh Mudgal vice president of Monnet Ispat said that “The sponge iron industry is currently breaking even. Any rise in raw material prices from here will turn the returns negative.”
Mr Anand further said that an estimated 32 million tonnes of good quality ore is annually required to meet the need of industry, of which 3.5 to 4 million tonne is for feeding the foundry industry for production of pig iron. Currently, iron ore mining in Bellary-Hospet is restricted to the public sector NMDC, whose capacity is inadequate to meet the foundry industry need.
(Sourced from BS)