As domestic iron ore price rises, steel industry demands ban on its export

With higher domestic prices of iron ore and pellets hurting the secondary steel producers, the industry has written to the Prime Minister Office (PMO) asking for a ban on exports of the key raw material used in the manufacture of steel. The domestic secondary steel industry contributes nearly 55 per cent to the total production of the alloy in the country. These players produce steel through the electrical route, unlike the primary steel producers who use blast furnaces to make the alloy.

Pellets are small balls of iron ore used in the production of steel. The raw material forms 60 per cent of the cost of production of steel and hence a spike in prices of the commodity hurts margins. In the last six weeks, prices of finished steel have declined by 8-10 per cent. With raw material prices remaining stiff, secondary producers are facing margins contraction of about 10-11 per cent. The recently concluded iron ore mining auction in Odisha has also added to the woes of the secondary players as nearly 50 per cent of the mines auctioned have gone to large steel players for captive usage and the remainder, which have gone to merchant miners, are yet to start production. This has brought about a shortage of material in the domestic market.