* Court closes 26 mines producing 40 mln T iron ore a year
* Mines have six months to renew licences and reopen
* 100 mln T low-grade iron ore stocks available in Odisha
(Adds details on iron ore availability, Modi plans)
By Krishna N Das and Jatindra Dash
NEW DELHI/BHUBANESWAR, May 16 India's Supreme
Court ordered on Friday the temporary closure of nearly half of
the iron ore mines in top producing state Odisha due to
non-renewal of years-old leases, in a blow to local steel mills
that depend heavily on high-quality ore from the state.
Odisha, which allows exports of only half of total iron ore
output, produced more than 70 million tonnes in the last fiscal
year from 56 operating mines.
The move is unlikely to lift global iron ore prices given
the limited flows from Odisha to international markets, but it
could force Indian steelmakers to source the raw material
overseas and soak up some of a forecast global supply surplus.
The 26 suspended mines produced about 40 million tonnes a
year, said Odisha's mines director Deepak Kumar Mohanty.
"We will abide by the court's decision and work on renewing
the licences for the affected mines within the stipulated six
months," Mohanty told Reuters.
The verdict could force steelmakers to cut output or import
expensive iron ore. Tata Steel Ltd and Jindal Steel
and Power Ltd are some of the companies that mine and
use ore from Odisha. Most of the mining in Odisha is done by
state-owned Odisha Mining Corp.
Tata Steel shares fell more than 4 percent on Friday. The
company's executive director Koushik Chatterjee said on
Wednesday its mines were operating with all necessary
"There's definitely potential for (iron ore) imports because
it takes some high-grade tonnes out of the domestic market,"
said Graeme Train, commodity analyst at Macquarie in Shanghai.
To curb illegal mining, the top court had earlier imposed
bans in Karnataka and Goa. The Goa ban imposed in September
2012, coupled with similar curbs enforced earlier in
neighbouring Karnataka, have sliced India's iron ore exports by
85 percent, or 100 million tonnes, over the past two years.
Though the bans in Goa and Karnataka have now been lifted,
output caps and procedural delays have meant iron ore production
remains muted and India continues to be the tenth-largest
exporter, down from its earlier No.3 position.
Analysts expect a gradual recovery in Indian iron ore
exports over the next two years, but the pace is likely to be
modest and far from a record high of more than 117 million
tonnes set in the fiscal year through March 2010.
GRAPHIC-India's iron ore output/exports
TIMELINE-India's moves to curb iron ore
The court judgment on Friday could also lead to higher
imports of steel from countries such as South Korea and China.
Steel imports have seen double-digit growth in recent years as
local raw material shortages have hurt production.
That would go against the plans of opposition leader
Narendra Modi, who is set to be the next prime minister of
India. He wants to focus on exporting steel instead of iron ore.
An analyst said that as some 100 million tonnes of low-grade
iron ore stocks were available in Odisha, impact of the mine
suspension would be limited.
Indian steel companies have historically stayed away from
low-grade iron ore as they had enough ore with iron content of
more than 60 percent. But the recent bans have forced them to
invest in plants that can use low-quality ores.
Steelmakers, including JSW Steel Ltd, Essar Steel,
Prakash Industries, Monnet Ispat & Energy,
and Adhunik Metaliks, have already set up plants
capable of processing low-grade iron ore dug from the ground and
usually exported to China.
(Reporting by Krishna N Das and Jatindra Dash; Additional
reporting by Manolo Serapio Jr. in Singapore; Editing by Mayank
Bhardwaj and Tom Hogue)