Stung by curbs, iron ore firms in India throw in the towel

Stung by curbs, iron ore firms in India throw in the towel
A general view shows the open pit of Sesa Sterlite iron ore mine in Codli village in Goa December 9, 2013.

Codli Village, INDIA/SINGAPORE - Top trader MMTC's US$80 million iron ore export terminal, ready since 2010, has never handled a cargo.

Now the company wants to spend $16 million to convert the terminal to ship coal.

Bans on iron ore mining and exports in top producing states of Karnataka and Goa have choked the industry so hard that MMTC is one of many firms exiting.

Even if efforts to fully lift the bans make it past the many bureaucratic and legal hurdles, iron ore miners do not expect complete resumption of production until late 2014.

The bans, put in place as the government tried to clamp down on illegal mining, have cut the iron ore exports by around 85 per cent, or 100 million tonnes, over the past two years.

They have also reduced foreign exchange earnings by more than $17 billion in the same period, according to the Federation of Indian Mineral Industries (FIMI).

The structural shift in India's iron ore industry could be a blessing for other suppliers, as demand growth from top market China slows and Australian miners Rio Tinto and BHP Billiton ramp up output. It will also make it harder for India to regain its spot as the world's No.3 exporter of the steelmaking raw material.

"It's pretty evident that there's lasting damage to the industry," said R. K. Bansal, a secretary general at FIMI. "But if the government of the day at the state and central level, as well as other authorities, stick their neck out and take decisions then this paralysis can go."

Mining in Goa was banned in September 2012, freezing shipments that reached about 50 million tonnes in the 2010-11 fiscal year.

In neighbouring Karnataka, where the ban started in 2011, exports remain frozen even though it was lifted in April. In both states, the bulk of mining was done by private companies, which were accused of mining outside lease areas and in excess of set limits.

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