India: Iron ore miners in Karnataka withhold offers amid uncertainties over new minerals tax bill

• Market lacks clarity, miners withdraw offers
  
  
• Lack of high-grade ore availability raises concerns
  
  

The Karnataka Mineral Rights & Mineral Bearing Land Tax Bill 2024 continues to be the most pressing issue within the domestic minerals industry. The potential implications of the bill have raised concerns about its severe impact on mineral taxes, prices, and the broader economic landscape. Following this, limited auctions have been seen and miners are holding back offers awaiting clarity on the bill.

Domestic low-grade iron ore fines (Fe 57%) prices in Karnataka's Bellary region have seen minimal movements since the previous week. BigMint's weekly index for low-grade fines (Fe 57%) remains unchanged w-o-w at INR 3,050/tonne (t) ($36/t) ex-mines Bellary (excluding taxes).

However, the Fe 62% fines index witnessed a w-o-w increase of INR 100/t ($1/t) to settle at INR 5,000/t ($59/t) ex-mines Bellary, inclusive of taxes. Additionally, some offers were seen at higher levels, that is INR 5,300-5,400/t ($62-63/t), due to unavailability of high-grade material in the region. However, no deals were concluded at these offers, as buyers are yet to accept higher prices.

Industry sources indicate that demand for the steelmaking raw material in the region remains muted. Despite stable prices, trade volumes have been subdued. Buyers are reportedly waiting for clarity on tax policy before making significant purchases.

A Bellary-based buyer told BigMint, "NMDC's price can be seen as a reference, as it was the only company to successfully conduct an auction. Other miners have not been offering, and auctions in general have slowed down. The market remains unclear on price direction, with the impact of the bill anticipated by the first week of January."

Industry stakeholders fear the bill could lead to higher costs for mining operations, disrupt market stability, and adversely affect the overall competitiveness of the sector. To understand the far-reaching legal implications of the Bill and how might it impact the domestic industry, BigMint hosted a webinar on "Decoding the Karnataka tax bill, 2024: Impact on the iron ore and manganese ore industry" on 20 December, 2024.

As discussions unfolded, BigMint noted that it is still too early to draw conclusions, and there is no reason for a knee-jerk reaction.

While the state government has introduced the Bill, it has not yet become law; so the industry must wait to fully understand its impact. Miners will have 12 years to pay the retrospective taxes in installments, meaning the effect on production and supplies is likely to be minimal, and there is no need to panic.

Additionally, the introduction of retrospective taxes could make it more viable for domestic buyers to turn to imports. Rising domestic ore prices may encourage this shift, especially as the financial implications take time to become fully clear. A Bellary-based miner mentioned, "Miners are currently assessing the financial impact of the bill if enforced, as any further tax burden will come as a blow."

Meanwhile, the Federation of Indian Mineral Industries, which represents the interests of the country's mining companies, has stated that Karnataka's new proposed mineral tax bill is discriminatory and will, if brought into force, effectively "sound the death knell of the mining industry" in the state. In a letter addressed to the Chief Minister, dated 21 December 2024, the southern branch of the Federation has asked for this proposed bill to be withdrawn or reconsidered.

Rationale

• Zero (0) trades were recorded in this publishing window, receiving 0% weightage.
  
  
• Twelve (12) offers and indicative prices were reported, out of which nine (9) were considered as T2 trades. Hence, this category was accorded 100% weightage.
  
  

Karnataka iron ore sales scenario (20-26 December 2024)

Outlook

The proposed mineral rights tax could have significant consequences for Karnataka's mining and steel industries. Although short-term price stability is observed in low-grade iron ore fines, market players are carefully watching the unfolding situation.