The year 2020 has witnessed many upheavals in the Indian iron ore industry. However, normalcy in production and supplies seems to be slowly returning towards the end of the year.
The supply concerns that had emerged due to non-operationalisation of auctioned mines in Odisha before Mar’20 seem to be gradually subsiding with the state showing signs of ramp up in ore production. And we expect iron ore supplies to rise in the last four months of the fiscal.
Odisha – India’s largest iron ore producing state – recorded production of 9.43 mn t in Oct’20, up 20% against 7.82 mn t in Sep’20, according to provisional state government data maintained by SteelMint.
Importantly, production from captive miners such as steel majors JSW, Tata Steel, SAIL and AM/NS increased in Oct’20. JSW Steel’s production stood at 1.89 mn t – up 53% on a monthly basis against 1.24 mn t in Sep’20.
The integrated steel producer has scheduled an auction of 300,000 t of run of mine (ROM) iron ore on 10th Dec’20, which is likely to garner active participation.
State PSU OMC’s last auction of over 900,000 t of iron ore lumps saw hike in bids of up to INR 3,800/t with the entire quantity getting sold out.
While OMC hiked production to 0.88 mn t in Oct’20 vis-à-vis 0.62 mn t in the preceding month, leading merchant miner Rungta Mines ramped up production to 1 mn t from 0.64 mn t in Sep’20.
Hike in OMC’s output is due to resumption of production at its Gandhamardhan B block and commencement of operations at Tiring Pahar mines.
Notably, Serajuddin & Co. recorded production of 0.15 mn t in Oct’20, resuming operations at the Balda iron ore block for the first time since the auctions this year. The leading merchant miner has retained the 15.5 mn t block at a premium of over 118%.
According to SteelMint data, total production from the auctioned mines stood at 6.51 mn t in Apr-Oct’20 against a target of 28.70 mn t during the period, given the fact that these mines were required to produce a minimum of 80% of the output as recorded in the previous two years. Production from these mines in Apr-Oct’19 was 42.31 mn t.
Therefore, production from the auctioned mines is still way short of target. However, the upward swing is hard not to notice. Production from these mines stood at 4.06 mn t in the Apr-Sep’20 period.
While total production from Odisha in FY20 was 145 mn t, the share of mines auctioned in 2020 was roughly half of that at 71 mn t.
Out of the 16 iron ore mines auctioned before Mar’20, 8 have started production – JSW’s 4 mines, AM/NS, Kashvi, GM Iron and Serajuddin. Auctioned mining leases of – Socied De Fomento Industrial Private Limited, winner of Nadidih iron ore block, Vishal LPG Industries (Nadidih iron ore and manganese block) and Tarama Apartment Pvt Ltd (Teherai iron ore and manganese block) – are still under litigations (*correction)
Jindal Steel and Power (JSPL) and Shyam Ores Jharkhand Private Limited, winners of Guali and Jilling-Langalota iron ore blocks respectively, have not executed the lease deed with the state government yet.
JSW Steel with four mines and AM/NS India with one are reported to have produced 30% of the rated production capacity by the end of Oct’20. Production from these mines is expected to inch up in the coming months.
Odisha Iron Ore Production Status of Auction Mines in FY21 (Apr-Oct)
Quantity in mnt
Source: SteelMint
*Target Production FY21 (Apr-Oct): Considering 80% of last years production from the auction mines
In addition, production from the non-auctioned mines in Odisha stands at 39.72 mn t in the first seven months of FY21 compared to 33.64 mn t in the corresponding period last year – an increase of 18% y-o-y. SteelMint expects that supply concerns are likely to subside in the last quarter of FY21.
The case pertaining to disposal of iron ore stocks by the old lessees – the timeline for which ended on 31stOct’20 – is still being heard by the Odisha High Court. SteelMint estimates a stockpile of around 15 mn t with these miners as on 1st Nov’20, mainly of low-grade stock which is difficult to liquidate. However, the state government is also eager to facilitate disposal of this ore stockpile in view of the revenues to be earned in the process.
In a boost to overall national iron ore production in the year of COVID-19, Central PSU NMDC has resumed operations at the 7 mn t Donimalai iron ore mine in Karnataka.
*Correction: Socied De Fomento Industrial Private Limited, winner of Nadidih iron ore block, Vishal LPG Industries (Nadidih iron ore and manganese block) and Tarama Apartment Pvt Ltd (Teherai iron ore and manganese block) – are still under litigations. It was earlier mentioned that they have surrendered their leases.
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