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| Last Updated:18/06/2019

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Iron ore output likely to hit record 225 million tonnes in FY20


Date | Feb 19, 2019:

Iron ore production in the country is projected to touch a record high of 225 million tonnes (mt) in 2019-20 as merchant miners look to ramp up output at their mines headed for expiry by March 31, 2020.


Iron ore output is estimated at 210 mt this fiscal ending in next March and climbing to 225 mt in FY20. ICRA expects that in largest ore producing state Odisha, production could rise by 10 per centas 17 mines’ lease held by merchant producers are lapsing by March 2020. Together, these mines have an approved capacity to mine 66 mt of iron ore. Major mines in the state whose lease validity ends by then are under the leasehold of Rungta Mines, KJS Ahluwalia, Serajuddin & Company, Kaypee Enterprises, Kalinga Mining Corporation, Mid East Integrated Steel Ltd, KN Ram, RB Das, Tarini Prasad Mohanty, KC Pradhan and Lal Traders.


"Our assessment is that iron ore production will reach 225 million tonnes in FY2020. The spike in production will come majorly from Odisha where output is estimated at 112 million tonnes in FY2019, climbing to around 125 million tonnes in FY2020. Production in Odisha will rise significantly, with merchant miners looking to maximize output as their leases are nearing the March 2020 deadline", said Jayanta Roy, senior vice president and group head, corporate sector ratings, ICRA Ltd.


Iron ore production has been on an upswing since 2015-16, touching 155 mt, recovering from the multi-year lows of 126 mt in 2014-15 as regulatory issues and court (banning illegal mines) orders slowed the tempo in production. The ore output rose to 191 mt in FY17, and was in upwards of 200 mt in FY18 with Odisha contributing 100 mt to the pan-India output.


“Rising production trend can be gauged from the performance of merchant miners in Odisha. Such mines are now operating at 85-90 per cent of the capacity approved under environment clearance (EC). Some of the leading merchant miners have applied for hike in EC limits to scale up production”, said an industry source.


Other key producing states like Karnataka are unlikely to add up to the iron ore production numbers. Industry analysts assume NMDC's Donimalai mines may remain suspended in FY 20 as well, knocking off six mt from the state's annual output. The largest iron ore miner is sparring with the Karnataka government on some commercial terms. Production, though, is expected to be offset by the expected start in operations of JSW's captive mines in next fiscal. On Goa, analysts are not betting on revival after the Supreme Court in a sweeping order in March 2018, scrapped operations in 88 mining leases. But the enhanced production in Odisha will more than recompense Goa's loss.


On Karnataka, Roy said, "On Karnataka, we foresee a production of 33 million tonnes (mt) this fiscal compared to the Supreme Court ceiling of 35 mt. FY2020 output in Karnataka would see a shrinkage in production by almost four mt, if that NMDC's Donimalai mines remain shut. The loss in output from that mine will be somewhat offset by companies like JSW Steel starting production from the mines they won at auctions".


Higher domestic production is expected to cut dependence on imports. India has already turned into a net iron ore importer with import volumes seen at 15.7 mt in this fiscal. Imports are anticipated to slide to 9.6 mt in FY20. Also, production will be in excess of the domestic demand. ICRA Reseach forecasts an overall iron ore demand of 213.4 mt in FY20. After factoring in imports, the country will be left with a surplus of 21.3 mt in next fiscal.