Slowdown in Beijing brings iron-ore country Bellary to a halt

Bellary traffic police estimate the number of trucks passing through the town every day has plunged to barely 200 from the 15,000-odd in September.

It has been a killer drop in numbers, literally. “You have heard of farmers’ suicides, soon you will hear of truckers’ suicides,” says Venkat Rao, president, Bellary Lorry Owners Association. According to Rao, the economic slowdown has already pushed two truckers to kill themselves in Chitradurga and Davangere.

Many of Bellary’s truckers were farmers till they decided to hitch themselves to the booming local business of iron-ore exports. It had been a hugely profitable shift till the global financial meltdown led to cuts in steel production worldwide, including in China, the primary destination for Bellary’s ore. In the town’s backyard, 25 of the 40 small-to-medium steelmakers have shut shop, and the giant Jindal Steel has cut production.

The demand for high quality iron-ore pellets (of grade 62 and above) is down. The demand for iron ore fines, a by-product of the pellets, is non-existent, say spokespersons of a private mining firm in Bellary district. From a peak of Rs 7,350 per tonne when China was pulling out all the stops in preparing for the Beijing Olympics, iron ore prices have now sunk to Rs 1,600 per tonne.

“China has been the major market for iron ore exports. The domestic market consumes less than 20 per cent of the ore. The whole cycle has been affected because of the slowdown in China,” says Rahul Baldota, president, Federation of Indian Mineral Industries, and executive director, MSPL Ltd, a Bellary based mining firm.

Production in the 60 major private firms who have mining leases in the district is down 50 per cent. Only the big mines are currently functional. Average monthly production of ore is down from 5 metric tonnes to 1-1.2 metric tonnes.

“Major miners will review the situation around December. No one has cut jobs yet. For the present, only intermediary businesses like truckers have been hit,” says H Noor Ahmed, president, Bellary-Hospet Mine Owners Association, and part owner of KMMT Mines.

Across Bellary district, ordinary people who saw the mining business net profits of nearly Rs 3,600 crore per year for the major mining groups, bought into the boom by entering transportation and allied businesses.

Now, as 80 per cent of the nearly 18,000 heavy vehicles — lorries, trucks and tippers — have not moved out of their yards for two weeks or more, their owners have begun to default on loan repayments to the half-dozen finance companies in the district.

In 2007, most of the 6,000-odd residents of Bomanal village, barely 20 km from Bellary, were engaged in agriculture. Between May and June of 2007, its residents owned 20 lorries. By October that year, the number had jumped over five times, to 110.

“I went into the trucking business in September last year, since finding labour for agriculture was a problem. With a loan of Rs 60 lakh from two finance companies, I bought four trucks, including a 10-wheeler. They are all just standing now,” says Deva Reddy, a Bomanal resident.

The lorry-owners association says as many as 300 truckers are facing seizure of their vehicles after having defaulted on loan repayments for three consecutive months. Unconfirmed reports say as many as 1,000 lorries have already been seized.

“I can start making repayments if the trucks start moving again. We are telling the finance companies that seizures will benefit nobody. We are asking them to spread the repayment over longer periods,” says B Hireswamy, who owns a 10-wheeler and is currently defaulting on the repayment of Rs 60,000 per month.

Everybody connected to the mining business is now closely monitoring global iron ore prices. A small increase over the past week has given hope to some, but others believe the depression story could continue for a while.

“With the fiscal stimulus package announced in China there are hopes that the export market will no longer be depressed. But we will have to wait and see how soon it happens ¿ probably over the first quarter of the next fiscal,” says the president of the Federation of Indian Mineral Industries.