Iron Grip Loosen? CCI Mining Study Flags Export Worries, Pricing Woes

2 Jan 2024 , 10:13 AM

According to a report by fair trade regulator CCI, exports of iron ore should be prohibited as differential pricing is likely to cause worries about competitiveness. The competition watchdog started a targeted investigation into the mining industry, particularly iron ore in India, and its related industries, such as steel, in order to guarantee fair markets.

The objective was to evaluate the competitive viewpoint and ascertain whether the iron ore market is operating in a way that is suitable for the larger economic environment.

In addition, CCI has identified potential problems with the price of iron ore from captive mines in its market study on ‘Dynamics of Competition in the Mining Sector in India With A Focus On Iron Ore.’

The Competition Commission of India (CCI) stated in a release that ‘the allocation of captive mines to some players creates entry barriers in the iron ore and steel sector as entry and successful operation becomes costly for new firms.’

According to the study, there may be competitive issues if iron ore is priced differently for various end customers.

According to the report, it is impossible to remove captive mines that are currently in use before their term is over because doing so could impede productive synergies.

According to the analysis, the 2021 mining legislation modifications permitted captive mines to sell up to 50% of their excess iron ore on the open market, which is expected to increase the market’s supply of iron ore.

It did, however, point out that in order to prevent the purchasing company from incurring excessive costs—especially if the buyer is a competitor of a captive mine-owned firm in the steel market—it is imperative to keep an eye on the prices at which a captive mine sells its excess input to other organisations.

‘…exports of iron ore should be discouraged while simultaneously encouraging high value-added activities, including domestic production of steel, which will control the prices as well,’ the CCI stated.

The report recommended hosting weekly or bi-weekly auctions in order to accommodate the business requirements of the participating enterprises and alleviate the bottleneck in iron ore availability through e-auctions. The objective of this is to improve accessibility and efficiency in the iron ore market.

It also emphasised the significance of supporting regulations that gradually phase out ‘dirty’ technology in order to promote sustainable mining.

The study underlined how important it is to have a clear legislative framework in order to encourage the use of clean technologies and make it easier to transition production processes to sustainable ones.

In order to reduce the high cost of compliance for industry players, it has also been advised to guarantee ease of regulation implementation.

According to CCI, the competition watchdog has carried out a number of market studies in the last several years in a variety of industries, including e-commerce, telephony, and pharmaceuticals.

The objectives of these studies were to fill knowledge gaps, improve comprehension of market dynamics, and provide a solid theoretical basis for competition laws.

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