Logistics challenges drive India’s steel mills to import iron ore

MUMBAI: Steel mills in India are increasingly tapping the global market for iron ore as they find it difficult to transport the key raw material from local mines, and demand for the metal surges in response to the government’s ambitious plans to build out the nation’s infrastructure.

“Today, India is a net importer of iron ore,” as producers along the coast bought from overseas because they faced domestic logistics challenges, mainly as a result of an overloaded railway system, said Tuhin Mukherjee, managing director of Essel Mining & Industries Ltd, in an interview in New Delhi.

Freight and passenger trains in Asia’s third-largest economy jostle for space on the same tracks, and goods carriers often have to make way for passenger traffic, prolonging turnaround time for wagons hauling commodities.

More supplies of iron ore will be required as the South Asian nation is set to overtake Japan as the world’s second-biggest steel producer this year.

More demand from India for imports will help global mining companies.

Fortescue Metals Group Ltd doubled sales outside China to eight per cent in the year through June, and had experienced strong growth in cargoes to India, said chief executive officer Elizabeth Gaines in August.

“If iron ore is available at competitive prices domestically, it won’t happen,” said Seshagiri Rao, joint managing director of the country’s top mill JSW Steel Ltd, referring to imports.

“That’s why we are requesting the domestic mining companies to adjust the prices in line with the quality of the iron ore. But the problem today is that even though the iron ore is getting mined, transportation is the issue.”