KOLKATA (miningweekly.com) – The closure of NMDC’s Donimalai iron-ore mine has triggered conflicting claims about supplies, with the industry saying there is a shortage, which gives rise to higher prices and imports, while the Karnataka government, for its part, has sought central intervention to tackle a glut in the steelmaking raw material.

Karnataka Chief Minister H D Kumaraswamy, in a communication to the Indian Prime Minister, has sought the federal government’s immediate intervention to check a glut in the state, while steel mills are increasing imports, taking advantage of the low 2.5% import duty on the raw material.

The Minister pointed out that Karnataka’s iron-ore mining sector has been skewed by several restrictions. On the production side, the Supreme Court had imposed a production ceiling of 30-million tons a year for all mines in the state and the sale of mines had been restricted to e-auctions only, while the free merchant sale by miners at negotiated prices was also prohibited.

Restricting the sale of mines to competitive bidding only had resulted in large unsold stocks lying at pitheads, while steel companies were importing at lower prices, the Chief Minister had communicated, according to a government official.

The state government feared that with miners prohibited from exporting iron-ore or iron-ore pellets from the state as per court orders, some mines would be forced to close operations if the rise in stocks continued unabated.

While the state government was claiming a glut and prospects of imports surging, the Federation of Indian Mineral Industries predicted a 10% to 15% rise in iron-ore prices following suspension of operation of NMDC’s Donimalai mines and lower volumes of raw material available in the local market.

At present, iron-ore in Karnataka was priced between Rs1 500/t ($21/t) and Rs2 500/t ($39/t), excluding all taxes and levies, the official said.

As reported by Mining Weekly Online, NMDC last week suspended operations of the seven-million-ton-a-year mine opposing the Karnataka government’s stipulation of an 80% premium on sales to be paid by NMDC as lease rental after the government renewed the latter’s mining lease earlier this month.

According to industry data available, Indian iron-ore imports during April to September this year, were estimated at 7.97-million tons, up 183% over the corresponding period of the previous year with about 65% of the volume shipped in from Australia.