The share of state-owned merchant miners in India’s total iron ore production pie in the financial year 2021-22 (FY’22) will most likely go up from the present 42% to around 55%. As per SteelMint’s calculations, the share of all merchant producers together will be around 128 mn t and that of captive producers, 92 mn t. In the 128 mn t corpus, the share of public sector or state-owned merchant producers will rise to around 70 mn t from nearly 50 mn t in FY’21.
It may be mentioned that, as per SteelMint’s estimates, total iron ore production volume in FY’22 will be around 220 mn t. The estimate is based on the new mines coming into production after the auctions. India’s iron ore production in FY’21 was at 204 mn t.
PSU miners’ ascendance
The rise in the share of state-owned miners points to the fact that the private merchant miners will have a reduced play in India’s iron ore dynamics, going forward, post-the 2020 auctions.
The state-owned miners like NMDC and OMC are likely to be more aggressive with their production plans, especially OMC. It may also become the top-most producer in India’s largest iron ore producing state of Odisha by FY’22, with a consolidated capacity of 34 mn t. It has had new mines Tiringpahar and Gandhamardan B coming into production last calendar and plans to expand output further in the next fiscal to 25 mn t. It has also been allotted Guali, won by JSPL, and Jilling-Langalota (won by Shyam Ores) for 10 years under the new mining reform norms.
NMDC, on its part, has plans to touch 50 mn t by 2025. But, in the near term, it will start full-scale production at its Donimalai mines in Karnataka by next fiscal where the EC limit is a sizeable 7 mn t per annum. NMDC had suspended mining here in 2018 following a decision of the state government of Karnataka to impose an 80% premium on iron ore sales from the mine. The miner’s production in FY’21 was at 34.23 mn t, which is expected to reach 40 mn t in FY’22, with Donimalai contributing a substantial chunk.
Steel Authority of India (SAIL) is allowed to sell 25% of its iron ore production from its previous year in the merchant market via auctions. This quantum could touch 3 mn t from the present 2.5 mn t.
Private merchant players on backfoot
On the other hand, most of the leading private merchant players like Essel Mining, Rungta Mines and Serajuddin & Co are on the backfoot. Rungta, once the largest merchant miner in Odisha, has lost some of its mines in the auctions. In fact, in FY’21 Serajuddin, Essel Mining and Rungta Mines witnessed year-on-year (y-o-y) decline in production by 76%, 56% and 66% respectively. Collectively, these three produced around 35 mn t less in FY’21 compared to FY’20.
But, still, they are operating at their optimal capacity through their present mines. The reason being they are keen to leverage the rising prices in iron ore at home and overseas that are fetching hefty margins. Of late, the 62% Fe grade broke the $200/tonne threshold, buoyed by global and China’s voracious steel demand. Closer home, NMDC’s latest benchmark prices rose 30% for fines and 10% for lumps.
Captive miners a force to reckon with
Meanwhile, the large integrated steel mills have emerged as a force to reckon with in the iron ore dynamics after the auctions. In a bid to achieve raw material security, these mills paid hefty premiums at the auctions to corner some of the best blocks, prime example being JSW Steel.
In FY’21 the share of the captive miners, including SAIL, was at 90-odd mn t. This is slated to rise marginally to 92 mn t in FY’22, as per SteelMint’s estimates.
The iron ore auctions’ legal nitty gritty allowed captive miners to sell 25% of their production in the merchant market. However, SteelMint has not considered this quantum as a component of merchant sales because a significant chunk is not likely to be forthcoming. “We have so far not seen any such sales in the merchant market and do not think this would be likely in significant volumes since the mills would rather keep the ore for their own steel-making,” observed a source.
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