KOLKATA (miningweekly.com) - The Indian government might direct iron-ore miner NMDC Limited to suspend exports to mitigate the shortage of raw material being faced by domestic steel producers.

The move to get NMDC to halt exports comes in the wake of 26 mines in the eastern Indian province of Odisha being forced to shut operations following a Supreme Court order.

NMDC is the country’s largest iron-ore miner, with production of about 32-million tonnes a year, of which a nominal two-million tonnes a year is exported to Japan and South Korea under long-term contracts.

Diversion of exportable iron-ore to the domestic market might not have a big impact on bridging the demand/supply gap faced by steel producers, but producers have argued that all efforts needed to be taken by the government to contain rising raw material import dependency following the closure of mines in Odisha.

The new Indian government, which was sworn in on May 26, and which was expected to appoint Ministers on Tuesday, would take a final call on a directive to NMDC, which is owned and managed by the government.

Industry representative bodies have already lobbied government seeking at least a temporary ban on exports by NMDC.

In a communication to the Finance Ministry, the Associated Chamber of Commerce (Assocham) said that the closure of Odisha mines would create an acute shortage of raw material forcing steel producers to sharply cut plant capacity.

Assocham expressed concern that lower capacity by local steel mills would necessitate higher imports of finished steel to meet local demand.

It sought an immediate temporary halt in iron-ore exports by NMDC. The industry body said that as the iron-ore miner had long-term supply contracts with Japan and South Korea, NMDC should explore the possibility of meeting its overseas commitments through merchant purchase of iron-ore from Australia while diverting Indian ore to local steel producers.

The temporary closure of Odisha mines was expected to reduce supplies by 40-million tonnes from the 70-million tonnes normally extracted from the province.

Both Steel Authority of India Limited (SAIL) and Tata Steel, two of the country’s largest steel producers, were gearing up for sourcing iron-ore through imports as contingency measures should the temporary closure of the Odisha mines stretch beyond four to six months.

SAIL, which operates all its plants at over 100% capacity, might have to reduce the level if its captive mines in Odisha remained closed beyond two to three months.

At present SAIL produced about 10-million tonnes a year of iron-ore from Odisha and two of its mines shut down accounted for about six-million tonnes a year of raw material for the steel producer.