In what would surely come as a huge relief to scores of steel and sponge iron producers sans captive mines, India’s iron ore production should be well over 20 mn t in Dec’20 – the highest monthly production recorded in FY21 – as per a SteelMint estimate.
The rise in monthly production is expected to be substantial compared to 18.36 mn t in Nov’20 and 16.72 mn t in Oct’20, thanks to increased supplies from Odisha and Karnataka.
Odisha supplies inching up
As many as 11 of the 19 auctioned iron ore mines in Odisha have resumed production till Nov’20 and gradual ramping up of operations by JSW Ltd., AM/NS India and Serajuddin & Co among others seems to have driven production volumes to nearly 11 mn t in Dec’20 – almost double that of Aug’20.
Sources in the Odisha government have informed SteelMint that India’s leading iron ore producing state is expected to clock production of 100-110 mn t in FY21 – a decline of over 30% against the record 145 mn t in FY20.
Production from the non-auctioned mines in Odisha, pegged at 47.14 mn t in the Apr-Nov’20 period against a little over 40 mn t in the corresponding period last year, is expected to remain at near-100% levels, given the manifold rise in iron ore prices in recent months.
State-owned steel-maker SAIL, too, has been mining increased volumes of late from its captive mines mainly in Odisha, Jharkhand and Chhattisgarh. SAIL produced 3.09* mn t iron ore in Dec’20.
JSW boosting volumes
Interestingly, JSW Ltd., which produced 2.66 mn t from its 4 mines in Odisha, has emerged as the leading iron ore producer in the state in Dec’20 surpassing captive miners Tata Steel and SAIL as well as heavyweight merchant miners such as OMC.
Likewise, JSW has commenced operations at 7 out of 9 ‘C’ category mines in Karnataka that the integrated steel-maker won at successive auctions from 2016 onwards. As per SteelMint data, JSW produced 0.49 mn t from its mines in Karnataka. The state produced 3.9 mn t of iron ore in Dec’20.
The Odisha government has reallocated to state PSU miner OMC three newly auctioned iron ore mines that are expected to resume supplies from the next fiscal onwards. The state government has informed that bids will be invited for at least 6 new iron ore blocks by end-Jan’21. AM/NS India, too, has received forest clearance to commence operations at the over 7 mn t/per annum Ghoraburhani Sagasahi block in Odisha. Supplies, therefore, are likely to increase in the coming days and months.
Prices in Odisha seen correcting downwards
SteelMint believes this could put a brake on soaring prices. SteelMint’s Fe 63% iron ore fines (Odisha index) was assessed at INR 6,300/t ex-mines on 9 Jan’21 – down from INR 6,500/t in mid Nov’20. However, NMDC iron ore fines prices (Fe64%, 0-10mm) from the company’s Chhattisgarh mines were assessed at INR 4,810/t in the first week of Jan’21 compared to INR 3,160/t in Oct’20. NMDC has recently announced that there may not be any further hikes.
Far-reaching reforms
Most importantly, key mining reforms that the Union Cabinet recently ratified are likely to bring about far-reaching changes in India’s iron ore sector. Apart from auctions of new mineral blocks, reallocating non-producing PSU mineral blocks, strengthening the minimum dispatch norm from auctioned mines, allowing captive miners to sell up to 50% of annual production (but have to pay a premium decided by govt) and letting PSU miners facilitate production from non-operational auctioned leases are likely to boost the country’s mineral output. Likewise, the proposed National Mineral Index (NMI) could turn out to be a game-changer in rationalising royalty and statutory levies in the sector.
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