NEW DELHI (Reuters) - Indian steelmakers are looking to bid for much of the 11.46 million tonnes of low-quality iron ore that Goa will auction, after court-ordered restrictions on mining have cut off supplies.
The domestic steel mills have traditionally preferred ores with higher iron content but are now developing technology to use whatever ore they can lay their hands on.
Goa used to be India's top exporting state, with sales of more than 40 million tonnes a year mostly to China. But it has not produced or exported any ore since the Supreme Court imposed a ban 14 months ago to curb illegal mining.
The court on Monday said it would allow the auction of ore that was mined before the ban.
"We would definitely like to buy some from Goa," said RK Goyal, managing director of Kalyani Steels Ltd (KLSL.NS). "The availability of Goan ore will also help us get a more competitive price than what we're paying in Karnataka."
The company, which buys ore mainly from southern Karnataka state, has been able to get only 70 per cent or less of the more than 100,000 tonnes of iron ore it needs every month.
The Supreme Court in April revoked a 2011 ban on mining in Karnataka, but operations have resumed in only about a dozen of its 115 mines.
Kalyani Steels, JSW Steel Ltd (JSTL.NS) and Kirloskar Ferrous Industries Ltd (KRFI.BO) are part of the Karnataka Iron & Steel Manufacturers' Association that recently appealed to the Supreme Court to stop the export of the stockpiled Goan ore.
Their appeal surprised miners in Goa because Indian companies have generally used high-quality ore from Karnataka and eastern Odisha state.
The recent shortage has forced steelmakers, however, to adopt methods to be able to use ore with an iron content of less than 52 per cent.
Steelmakers such as JSW Steel, Essar Steel ESRG.UL, Prakash Industries Ltd (PRKI.NS), Monnet Ispat & Energy Ltd (MNET.NS), Adhunik Metaliks Ltd (ADME.NS) and Steel Authority of India (SAIL.NS) are investing in plants that can process low-grade iron ore.
Many small unlisted companies have also set up the so-called beneficiation plants, which extract waste material from ore and increase its iron concentration.
Kirloskar Ferrous plans to make use of one such plant, which will bid for the low-quality Goan ore that goes up for auction. Kirloskar Ferrous will buy its concentrated product, R.V. Gumaste, the steel firm's managing director, said.
The company needs more than 1 million tonne of iron ore a year but is making do with just 600,000 tonnes, Gumaste said.
Indian steel mills' capacity utilisation hit an all-time low of 82 percent in the year to March 2013, according to lobby group ASSOCHAM.
"Even though Goan ore is low grade, we can at least survive," Gumaste said. "I was used to eating bread and butter but will have to be ready to eat dry biscuits now."
Editing by Jo Winterbottom and Jane Baird