Iron ore supply takes center stage in India’s steel growth ambitions

India's push to reach 300 million metric tons of annual steelmaking capacity by 2030 is bringing iron ore security into focus, with industry participants debating the viability of domestic supply versus imports.

While domestic iron ore remains the foundation of India's steel expansion, the increasing mismatch between steel and iron ore growth, deteriorating feed quality and regional logistics constraints is paving the way for imports to play a larger role, industry participants said at an industry event held in Kolkata Aug. 19-21.

"The plan is to have 100% domestic sourcing," Puneet Jagatramka, executive vice president at JSW Steel said. Imports, however, could become competitive for port-proximate operations, depending on prevailing market conditions, he added.

Domestic challenges

The industry's growing interest in imports stems from slow growth in iron ore production, declining ore quality, limited beneficiation adoption and logistical bottlenecks.

Indian steel industry's growth is around 6%-7%/year, while the iron ore industry is expanding by about 3%-3.5%, said Mohit Ratolikar, vice president commercial at JSW Steel. He further estimated that 300 million mt of steel capacity could require around 480 million-500 million mt of iron ore.

For blast furnace operators, tonnage alone does not guarantee usable supply, Ratolikar said, adding Indian iron ore quality was deteriorating, and alumina levels were gradually increasing, making it harder to achieve the required alumina-silica balance.

Participants further underscored the need for low-grade iron ore beneficiation that can increase utilisation of India's abundant low-grade iron ore resources.

Beneficiation would be essential to enlarge the usable domestic ore pool, but there are constraints in developing those facilities for which government support would be required, said Anil Patro, head of raw materials, Jindal Steel.

End users also cited logistics as a major pain point, given the elevated cost of moving ore from mines to steel plants.

"We may have production at the mine but may not be able to use it if logistical challenges are not resolved." said Pavan Kakani, director and group COO at Super Smelters.

With iron ore reserves concentrated in eastern India and deficits persisting in major steel consumption centres in the south and west, cost-effective inter-regional movement of iron ore was crucial, Ratolikar said.

Import attractiveness

India's domestic iron ore reserves remain a key competitive advantage for the world's second-largest steel producer, although steelmakers are increasingly considering imports as a supplementary source to enhance cost efficiency and blend optimization.

Industry executives said coast-based mills can compare domestic and imported supply on delivered cost, quality and logistical considerations, with proximity to ports making imports attractive at particular points in the market cycle.

Imported iron ore with suitable chemical characteristics could be blended with domestic material to improve furnace efficiency and reduce flux, fuel and imported coking coal consumption, Ratolikar said, adding imports can act as a balancing act, potentially accounting for around 10-15% of procurement in some scenarios to correct the overall blend.

Additional seaborne availability amid slower Chinese demand, could lower international prices and improve import viability, Kakani said, adding India could have to rely more on imported ore if beneficiation capacity did not become economically viable.

Challenges with auctions and high premiums on mines have also acted as a deterrent in securing domestic iron ore supplies for Indian steelmakers and pushed them into considering imports.

Earlier this year, Tata Steel booked a 20,000-mt iron ore lump ship from its Canadian subsidiary, Tata Steel Minerals Canada, to assess the cost-effectiveness of sourcing such shipments and testing to understand its potential impact on future steel production.

Nevertheless, major end users said they would increase domestic sourcing as availability expanded.

While India's top iron ore producer NMDC assured ample availability for end users. "We are fully geared up to meet the requirements of the steel industry," said Vivek Nishant Nath, director commercial at NMDC.

Meanwhile, iron ore's inclusion as the ninth component in India's Index of Core Industries (ICI) also reflected its strategic importance to growth, Patro said.

Platts, part of S&P Global Energy, assessed the Iron Ore Index, or IODEX, at $95.45/dry mt CFR China Aug. 21, down 20 cents/dmt day over day.