India’s iron ore production rises marginally by 2%, y-o-y, in first 6 months of 2022

• India’s iron ore production during Jan-Jun at ~134 mnt
• June output drops 15% m-o-m
• Export tariffs hit steel and raw material demand

India’s iron ore production rose a little over 2% year-over-year in the first six months of 2022 (January-June) compared to the same period last year, as per provisional data available with SteelMint. The country’s iron ore output is slated to reach around 134 million tonnes (mnt) in H1 2022 compared with around 132 mnt in the year-ago period.

However, the striking fact is that production dropped over 15% m-o-m to around 19 mnt in June from over 22 mnt in May, largely due to the steep export duties imposed on finished steel and raw materials such as iron ore and pellets in the third week of May, SteelMint understands.

Although H1 production inched up year-on-year, output fell by around 13% on the year in June compared with over 21.5 mnt in June 2021.

In fact, June production is considerably lower than average monthly production of around 22-23 mnt witnessed so far in 2022.

State-wise output

Odisha, the largest iron ore producing state, had a share of over 55% in the country’s overall production in the first six months of 2022, although total output fell to around 75 mnt from more than 78 mnt in the same period last year.

Moreover, production from Odisha declined sharply by over 16%, m-o-m, in June to around 11 mnt from over 13 mnt in May.

The other major iron ore producing states of Chhattisgarh, Karnataka and Jharkhand also witnessed a similar drop in m-o-m production in June. Chhattisgarh and Karnataka produced 23 mnt and 18 mnt of iron ore, respectively, in the first half of 2022, while output from Jharkhand rose to nearly 14 mnt from 10.5 mnt in the same period last year.

Factors affecting production

• Export duty on Iron ore and pellets: The government slapped a 15% export tariff on finished steel, while iron ore exports now attract a duty of 50% across grades. The tariff on pellets stands at 45% from nil previously. India exported more than 26 mnt of iron ore and pellets last fiscal. The steep duties are bound to bring down export volumes, thereby impacting production directly.

• Karnataka miners seek clarity on SC order: Notably, the Supreme Court on 20 May lifted curbs on exports of iron ore from Karnataka and eased all restrictions on sales of ore from the districts of Bellary, Chitradurga and Tumkur where mining activity had been prohibited in 2011 following environmental lapses. The court-appointed monitoring committee auction has made way for all producers in the state now being able to sell iron ore on direct contract/spot basis. However, the market was in a deadlock during the transition surrounding confusion regarding evacuation, dispatch and pricing of ore, which affected production and sales.

• Demand falls as mills cut steel production: The export duty on finished carbon and stainless steels – accounting for over 90% of the country’s finished steel exports last fiscal – has directly impacted steel production, with many leading mills having preponed maintenance and repair shutdowns in order to reduce output. Therefore, demand for raw materials has taken a beating amid overall gloomy steel prospects further weighing down production.

Outlook

India’s iron ore production increased by over 20%, y-o-y, to over 250 mnt in FY’22. With some auctioned mines ramping up production and greenfield blocks slowly coming onstream, SteelMint had earlier projected that the country’s output should reach around 260-265 mnt in FY’23.

However, the export tariffs have adversely affected steel demand and steel raw materials export prospects and we expect production in FY’23 to be in the range of 255-260 mnt – still higher compared to the last fiscal.

Indian Iron ore and Pellet Summit, 3-4 Aug’22, New Delhi

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SteelMint Events will be hosting the 5th Indian Iron Ore & Pellet Summit on 3-4 August, 2022 at The Lalit, New Delhi. The conference will discuss key issues being faced by the iron ore and pellets industry in India. The focus will be on market dynamics, policy-related changes, growth challenges and enablers, sustainability and decarbonisation goals, the way forward and many more talk points.