In an exclusive interview with Malay Chatterjee, Chairman-Cum-Managing Director of Kudremukh Iron Ore Company Limited (KIOCL), on the status of steel and iron, closure of Kudremukh, market pressure and KIOCL’s challenges with G’nY correspondent, the affable technocrat succinctly pointed out KIOCL’s futures plans.
The KIOCL enterprise of the Indian government was established in 1976 to develop mine and plant facilities in the nation. The annual capacity of its pellet plant is to produce 3.5 million tonnes of pellets and that of its blast furnace unit is to produce 2.16 lakh tonnes of foundry grade pig iron. Consumers from the steel industry worldwide as well as domestic consumers seek its products. Kudremukh, in Karnataka, is known to have one of the largest deposits of iron ore in the world. Despite closure of mining operations in Kudremukh, the Company has been able to open up other avenues.
G’nY: KIOCL exports to various countries. Which countries are your primary markets?
Chatterjee: KIOCL has been exporting its product – iron oxide pellets, to China, Japan, Iran, Taiwan, Indonesia, Turkey, Hungary, Romania etc. Recently, under the ‘Make in India’ mandate, KIOCL has exported one shipment of pellets to Iran.
G’nY: Wheredoes India stand as far as iron and steel is concerned?
Chatterjee: World crude steel production in 2015 was about 1,623 million tonnes, a decrease of 2.8 per cent from previous year. During this period, global iron production increased by around 100 million tonnes. The steel demand is leveling off, and the effect was a massive fall in the price of iron ore. In fact, it fell to a 10-year low of about 39 USD per tonne during 2015-16.
China’s economic strategy shifting from infrastructure driven to consumption driven brought down the growth in the use of steel almost to a halt, and signs of demand picking up in other parts of the world were not enough to offset China’s slowdown. At the same time, the world’s largest iron ore mining companies not only expanded production in Australia, but also elsewhere, leading to a substantial supply overhang. Closures of capacity, particularly in China, were not large enough to offset these expansions and many mining projects under development were halted or shelved.
Indian steel and iron ore markets also struggled badly during 2015-16. Steel imports increased by 25.6 per cent, to 11.71 million tonnes in the 2015-16 raising the market price. The domestic production of steel was decreased by 1.9 per cent in the last financial year. In order to protect the Indian steel industry, the Indian government introduced Safe Guard Duty on certain categories of imported steel and minimum import price has also been fixed.
G’nY: How is KIOCL coping with the challenge to cope up with the market pressure?
Chatterjee: KIOCL has been facing difficulty in utilising its rated capacity in the absence of raw material security, due to the fall in China’s market and higher logistic costs involved in movement of iron ore fines from Bailadila and Donimalai deposits of National Mineral Development Corporation (NMDC). Moreover, most of the integrated steel plants have equipped themselves with captive pellet plants and mini steel plants in Gujarat have completely switched to high grade imported lumps. All these factors have affected pellet sales of KIOCL adversely.
In order to cope with the present scenario, KIOCL is planning to use its surplus capacity for manufacturing pellets, by allowing domestic and offshore iron ore suppliers to bring iron ore and manufacture pellets to be sold to the close areas of Iran, Middle East, China etc. KIOCL imported one ship load of high quality iron ore concentrate from Brazil during September 2015, and converted it into pellets at KIOCL Pellet Plant and exported it to Iran during January 2016 under the aegis of ‘Make in India’. KIOCL hopes to improve its capacity utilisation and also bring in valuable foreign exchange.
KIOCL is currently devoid of captive iron ore mines for its raw material security in the Pellet Plant & Blast Furnace Unit and long term sustainability is an issue. Also, the high logistic cost of iron ore fines movement results in high cost of production, reducing the commercial viability despite KIOCL being a debt free plant.
G’nY: Allegations of illegal mining in Kudremukh Park have led to its closure. Any comments please?
Chatterjee: There is no such case of illegal mining as far as KIOCL is concerned. The mining lease over an area of 4605.02 ha was granted in 1969 to KIOCL at Kudremukh in Chikmagalur district of Karnataka State for a period of 30 years in which mining was done only in the area of 485 ha. KIOCL, which is a CPSU under the administrative control of Ministry of Steel of the Indian government, had practiced mining complying metalliferous mines regulations (MMR), Mines Rules, Act and other statutory regulations.
KIOCL had demonstrated the best practices in mining sector when it was operating Kudremukh mines—7.5 million tonnes per annum (mtpa) beneficiation plant with 67 km slurry pipeline with state of the art technology keeping in view the ecological and environmental issues in concern. Based on public interest litigation (PIL) on environmental grounds, the Supreme Court had stopped the activities at Kudremukh with effect from January 1, 2006 following which mining operation of KIOCL Limited had been completely halted.
G’nY: What are KIOCL’s futures plans?
Chatterjee: The Company is in the process of strategic expansion and diversification – targeting exponential growth, long-term sustainability and viability in the present competitive market. After closure of mining activities at Kudremukh, the Company is exploring various alternatives for mining in Karnataka and other states. To achieve this KIOCL has entered into memorandum of understanding (MoU) with Andhra Pradesh Mineral Development Corporation Ltd. (APMDC) and West Bengal Mineral Development and Trading Corporation Limited (WBMDTCL) for joint exploration and exploitation of iron ore deposits in the respective states. For acquisition of iron ore mines in the Karnataka, KIOCL is participating in the auction process of Category ‘C’ iron ore mines, which is scheduled during August 2016.
KIOCL has already submitted its offer to the Odisha government for acquisition of equity stake in Industrial Development Corporation of Odisha Limited (IDCOL). On acquisition of stake in IDCOL, KIOCL plans to set up iron ore beneficiation and pellet plant at at IDCOLKalinga Iron Works Ltd. (IKIWL), Barbil. Existing furnaces and establishing a captive power plant at IDCOL Ferro-Chrome & Alloys (IFCAL) will also be upgraded accordingly.
As a new business vertical, KIOCL has opened up an operation and maintenance portal to supervise multiple plants. KIOCL is also in the foray of bagging contract for setting up of 1.5 mtpa pellet plant on build-own-operate (BOO) basis at Bokaro Steel Plant, Steel Authority of India (SAIL), besides exploring avenues to enter into mining through the mine developer cum operator (MDO) mechanism.