HONG KONG--India's western state of Goa, the country's largest
exporter of iron ore, is unlikely to resume production of the
steelmaking ingredient any time soon, despite a court order
partially lifting a mining ban there.
Under a Supreme Court ruling issued Monday, mining companies
need to apply for a renewal of their mining leases, but that is not
the only hurdle, as output initially will be restricted to 20
million metric tons a year and as other governmental approvals will
be needed before production can restart.
A renewed flow of Indian supplies to the world market could have
major implications for mining companies like BHP Billiton Ltd., Rio
Tinto and Fortescue Metals Group Ltd, all of whom are ramping up
output in Australia just as demand growth from the world's main
importer, China, has been slowing. The result has been weaker
prices--benchmark Asia iron-ore prices have fallen around 15% so
far this year, although they are up on lows seen in early
March.
India was the world's third-largest iron-ore exporter after
Australia and Brazil until two years ago, but domestic output and
exports slumped after environmental concerns and illegal production
prompted legal restrictions on mining in several states, including
Goa. The state used to account for about half of India's iron-ore
exports, and China was its biggest buyer.
India exported 118 million metric tons of the ore in 2009-2010,
but in the financial year ended March 31 this had plummeted to
around 15 million metric tons.
"It will take some time. The Supreme Court has lifted the ban,
but the state government of Goa and the (federal) ministry of
environment and forests have to review their suspension orders,"
said Basant Poddar, vice chairman of the Federation of Indian
Mineral Industries, the largest miners' representative body in
India.
"There are lots of procedural issues," Mr. Poddar told The Wall
Street Journal, predicting that it would take until October for
these to be resolved if the various government approvals came
through speedily.
Output restrictions still apply elsewhere in India. Although the
Supreme Court lifted a production ban for a majority of the mines
in the state of Karnataka, the second-largest producer of the raw
material in India, its ruling also imposed conditions on the
resumption of operations that still haven't been met.
Should all the Goa approvals come through quickly, India's iron
ore exports might double to around 30-35 million metric tons in the
current financial year and then increase to around 50 million
metric tons by 2015-16, said Mr. Poddar.
Write to Biman Mukherji at biman.mukherji@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires