Insight Conversation: Anil Patro, Ashon International

India is the world's second-largest consumer of iron ore. But in recent years, it has also stepped up its exports. In 2023, it shipped 45.3 million mt or iron ore, marking a 183% rise on the year. About 95% of those exports went to China. Higher exports have led to price volatility in India's domestic markets, pressuring small-scale operations and have pushed secondary steelmakers to call for a ban on low-grade iron ore exports.

In a wide-ranging interview, Ashon International Head of Iron Ore Anil Patro talks to S&P Global Commodity Insights Managing Editor Rohan Somwanshi about potential taxes, price volatility, China's demand and potential decarbonization route for the industry.

A professional geologist with specialization in mineral, oil/gas exploration, Anil has over two decades of association with the Indian steel industry. In his previous role at ArcelorMittal/Nippon Steel (formerly Essar Steel), he spearheaded sourcing of iron bearing raw materials for their pan-India operations. He also was responsible for sourcing steelmaking raw material and procuring mineral resources for Ispat Industries. He is a major industry figure having profound knowledge of Indian mining regulations and its implications on mining and steel industry.

India removed export taxes on iron ore in 2022. What are the chances of it coming back amid calls from secondary steel producers to ban exports of low-grade iron ore?

India's move to impose export taxes on iron ore fines was circumstantial. The government made this move with a particular intention, which is to control the domestic price situation. When that objective was achieved, the ban was removed.

The low-grade ore, particularly the sub-58% iron content, is not useful for India. The Indian government would not like this inventory to pile up at the mines, and that's why there have been no moves to halt exports of this material.

I see a considerable time passing before such ores get beneficiated and utilized within India. When this happens and if the government sees higher utilization of the ores, it may impose taxes. At least in the medium term, no tax imposition is expected.

We have been seeing volatility for some time now in spot iron ore prices. Do you expect this volatility to continue? What are the alternative options for buyers?

Volatility in iron ore prices is going to remain in the foreseeable future, as no major steelmaker in China has achieved self-sufficiency to meet its iron ore requirements. And because they depend on external sources, there is going to be volatility as they come into the market and buy as required. It is a supply-demand situation.

The alternate option -- the only option -- to that is to have your own iron ore resources, so that cuts on the volatility part. But that is not going to happen for every and each large steelmaker -- I don't see any alternate option being available for 100% of the cases. To some extent, this volatility can be curtailed by acquiring some resources on their own or either within the country or maybe a tie-up with other players around the world.

India's iron ore usage is tied to its higher steel demand, which is backed up by its increasing steel capacity. Do you think the target to expand India's steel capacity to 300 million mt is viable?

The Indian government's target to raise the country's steel capacity to 300 million mt by 2030 is a very far-reaching objective. I personally feel by 2030, 300 million mt is not achievable. There's a clear reason behind that. In 2023, India produced 142 million mt and the 2030 target means just doubling the capacity. A growth of 100% within a span of six years for the steel industry is highly unlikely.

I feel 210 million mt to 220 million mt target is a reality by 2030. The government also has all the policy mechanism to achieve this and the economy is also robust, which means stronger demand.

The government is taking care of the demand side, with most of it coming from India's realty and infrastructure sectors. In these sectors, capital spending has been astronomically higher in the previous financial years. Such developments will take the number to maybe a maximum of 220 million mt by 2030, assuming the growth base remains at same level.

What impact will China's current economic situation have on its iron ore demand?

China's economy is a big challenge to predict. But, as a country, it would also definitely like to grow at a decent level. China also has an objective of moving toward green steel, which still not has a large enough presence.

Taking all the factors into account, in the medium-term, I think China's iron ore demand will almost remain flat for the coming years, maybe to the tune of 1 billion mt getting imported into the country.

Is high-grade iron ore a viable option for decarbonization? Are there other options for iron and steel decarbonization?

When we talk of decarbonizing the steel manufacturing process, it is not only iron ore. We also need green power source. This source has to be carbon-free or at least the plant should exist in a fossil fuel-free environment where steel is getting manufactured.

One of the major changes is that producers have to follow the direct reduction or electric arc furnace routes. If it's a traditional blast furnace, it then needs some green power to run. The iron ore which goes into these blast furnaces should also come from green routes. Those are the ideal requirements for getting carbon-free steel manufacturing process. However, at least now, the industry has started strategizing about how to make steelmaking process carbon-free. It's a long way to go when we reach the net-zero situation for steelmaking.

The initial target of making steel manufacturing carbon-free by 2050 is a little aggressive. I feel it will take much longer than that to make the industry carbon-free.