It is a big sigh of relief for miners in Karnataka. Thanks to the Supreme Court lifting ban on 18 iron ore mines. After a year of interruption on environment concerns, miners in Karnataka can now resume mining. Annual addition to the production capacity would now be a mind boggling 5 million tonnes. But then arises a concern of the increased capacity of affecting dwindling global iron ore prices!
Unless the raw materials are shipped overseas by exporters, the price factor would be affected. Why shipments are not feasible are because of excessive freight rates and 30 percent export tax. Nevertheless, India happens to be the world’s third largest exporter of iron ore output, exporting around100 million tonnes a year. Clamping of illegal mining has led to slumping of overseas sales.
The lifting of this ban from 18 iron ore mines is the gateway to the lifting of more bans giving scope for the gradual opening of other category mines.
Spot iron ore prices are already down about 40% this year due to China's cut in demand. However, this cut in demand of iron ore is blessing for Steel companies as the extra output from iron ore mines can be used by Steel mills. As soon as the news was out, Sesa Goa Ltd NSE showed an uptrend cheering traders!