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Indian coal, iron-ore imports from SA set to rise

30 Oct 2012
KOLKATA ( – South Africa has emerged as a key supplier of coal and iron-ore to India, which is increasingly relying on imports to meet its domestic demand.

According to government forecasts, India’s coal imports would hit the 100-million-tons mark by the end of March next year, with 20-million tons to be sourced from South African mines.

India mainly imports coal from Indonesia, Australia, South Africa and the US, but an official in the Coal Ministry said South Africa had emerged as the preferred supplier in recent months, owing to its liberal trading regime and competitive export prices.

“However, the industrial unrest in the South African mining sector could be a threat to India’s coal import plans from that country. Reports suggest that industrial unrest was worse in mining sectors other than coal. We can only hope that a contagion effect is prevented since from an Indian perspective disruptions in coal supplies from South Africa would have a negative impact on our supplies and cost of energy,” the official said.

An economist associated with India’s Steel Ministry commented that the projected imports from South Africa were a reflection of “deep structural flaws” in the development of India’s natural resources, pointing out that the country had coal reserves of 100-billion tons and iron-ore reserves of 28-billion tons.

“While it was true that rising demand for natural resource was indicative of economic growth, the sudden raw material shortage was also a result of the absence of strategic planning for strategic minerals to support manufacturing and infrastructure growth,” he added.

Coal shortages resulted from production growth failing to match rising demand, while iron-ore shortages were aggravated by a fall in absolute tonnage of production.

According to government projections, iron-ore supplies from domestic mines would fall short of the estimated demand of 160-million tons by 40-million to 50-million tons in the current year.

Indian iron-ore production has been steadily falling in the wake of investigations into widespread illegal mining, leading to a ban on mining operations in the two key producing provinces of Goa and Karnataka and a stringent clampdown on production in Orissa. In 2011, iron-ore production was 208-million tons, down 5% over the previous year.

Between April and September 2012, private steel mills were forced to import 600 000 t of iron-ore, over half of which was sourced from South African mines. For example, Indian steel producer, Essar Steel has appointed JSE-listed Kumba Iron Ore as its iron-ore supplier and was reported to be negotiating with Assmang as an additional ore supplier.

With uncertainty persisting over the resumption of operations of iron-ore mines in Karnataka, one of the top-producing provinces normally contributing 40-million tons a year, domestic steel mills would continue to face a shortage of raw material, pushing up iron-ore imports in 2013, to March 31, to four-million tons, half of which was sourced from South Africa, according to a government official.