Decline in iron ore demand and prices: KIOCL temporarily halts Mangaluru operations

Mangaluru: The Kudremukh Iron Ore Company Limited (KIOCL) has temporarily halted its operations due to a decline in the international market and the lack of a captive mine. The company, which has been exporting iron ore pellets, has ceased operations for the past five months.

After mining activities at Kudremukh stopped, KIOCL began procuring iron ore from other states, processing it at its plant in Kuloor, and exporting the pellets to foreign markets. However, this activity has now been temporarily suspended.

Since 2006, KIOCL has been sourcing iron ore from public sector companies like NMDC and transporting it by ship and rail to its plant. The cost of purchasing ore, transportation, and production has been rising, but the company was able to manage due to favorable prices in the international market. However, in recent months, the price of iron ore pellets has plummeted globally, making it unviable for KIOCL to continue its export business. As a result, the company has temporarily suspended its operations.

This suspension has put the future of around 1,000 employees, including 500 contract workers, at risk. These workers are employed at KIOCL’s offices and plants in Bengaluru and Mangaluru.

Decline in Chinese Demand

China, the world’s largest importer of iron ore, has seen a decline in demand for iron ore due to reduced production at its steel plants. Despite sourcing large quantities of ore from various countries, the global demand for steel has decreased, leading to a reduction in Chinese production. This has caused a drop in the price of iron ore pellets. Six months ago, the average price per ton was around $140, but it has now dropped to $102.

For KIOCL to resume operations profitably, the price needs to be above $135 per ton. However, with prices remaining low, the company has decided to halt its operations temporarily.

Struggles Without a Captive Mine

For several years, KIOCL has been trying to acquire a mine in Devadari, Ballari. The company has paid around ₹300 crores to the Forest Department to conduct mining operations on 404 hectares of land. The central Ministry of Environment has granted permission, but the land transfer is still pending.

H.D. Kumaraswamy, during his tenure as the Union Minister of Steel and Heavy Industries, signed off on the project. However, concerns over the transfer of forest land for mining have arisen. The future of KIOCL now hinges on the resolution of this issue.

Iron Ore Pellet Prices in the Last 7 Months (USD per MT):

January, 2024: $136
February, 2024: $125
March, 2024: $110
April, 2024: $112
May, 2024: $119
June, 2024: $108
July, 2024: $95

(Translated from a Kannada article by Venuvinod K.S.)