India: Chrome ore production drops 51% y-o-y in FY'21

India's chrome ore production dropped by a sizeable 51% year-on-year (y-o-y) in FY'21. All the chrome ore mines in India remain affected by the pandemic, but the reduction in production in the first half of the year was long apprehended due to the chrome ore mine blocks auctions in Odisha. Odisha caters to 98% of the total Indian chrome ore production and all the three major mines were auctioned off which led to a significant decrease in output.

In the second half of FY'21, production increased by more than two-fold from 0.53 million tonnes (mn t) to 1.46 mn t, with a bulk of the output recorded in Q4.

Key highlights

• Three major mines put under auction:
  
  

In the Odisha mines auctions in 2020, three major chromite mines were put up for auction, which made them non-operational for six months from Mar'20. In FY'20, total production from these mines amounted to 2.42 mn t, which accounted for 58% of the total chrome ore production in that year. All three mining blocks, Sukinda, Kamarda and Saraubil, were taken by Tata Steel Mining Limited (TSML) at a hefty premium of around 94%. However, the mines were out of operation as the changing of hands and getting clearance after the issuance of the Letter of Intent (LoI) took a long time. TSML started operations in Oct'20 at its Sukinda mines. However, production in the other two mines was started later, bringing the chrome ore production to normal levels only in Q4.

• Lower production in Q2 FY'21
  
  

Production of chrome ore was drastically affected in Q2 FY'21, decreasing by 44% quarter-on-quarter (q-o-q) to 0.19 mn t. Although production was already hit by the auctions, in Q2FY'21 it further impacted by the onset of the monsoons. Many open cast mines were filled with water, making it difficult to undertake mining activities. In addition the mining sector also faced production issues due to lockdown-led labour unavailability as majority of the migrant workers had gone back to their hometowns, and faced difficulties in returning. This impacted production at the non-auctioned mines.

• Production in Q4 was the highest
  
  

Production of chrome ore was the highest in Q4 at 0.8 mn t. Although, as per data, Q4 made a comeback, lifting the production figures, improvement in mining volumes could be witnessed only from Nov'20, when demand increased amidst scarcity in chrome ore supply in India.

The major reasons behind the scarcity were dispatch issues due to the sudden lockdown. With the mines of Tata Steel, BC Mohanty, and Misrilall ceasing operations, OMC remained the only merchant miner in the country. However, due to the sudden lockdown in March-end, after the pandemic hit the country last year, production at OMC also suffered, which intensified further in the monsoons. This led to nil auctions from May-Oct'21, when the base price was increased by 45% turning the mining sector lucrative. This also motivated TSML to increase its production swiftly. Meanwhile, the ferro chrome smelters were out of chrome ore stock which led to acceptance of ores at higher prices.