India's iron ore production expected to cross 200 mn t in FY21: SteelMint

India's iron ore production in FY21 could exceed 200 mn t, as per SteelMint analysis. Total production in the ongoing fiscal is projected to touch 202 mn t, considerably lower compared to 245 mn t in FY20. Total production in the Apr'20-Jan'21 period stands at 159.51 mn t.

However, on closer analysis it would appear that the y-o-y shortfall in production is primarily due to significantly higher production from Odisha last fiscal which stood at 145 mn t. This was, in part, due to higher production, particularly in Jan'20 and Feb'20, from mines in Odisha that were earmarked for auctions before 31 Mar'20. Moreover, production from Odisha in the current fiscal is expected to shrink by over 30%, as SteelMint has previously reported. Total iron ore production from Odisha in FY21 is projected to touch 106 mn t.

Odisha production scenario:

Disruption in mining activity due to the Covid-19 pandemic, slow operationalisation of the auctioned iron ore leases and the fact that these leases are yet to attain optimum production levels cumulatively account for the drop in numbers from Odisha. SteelMint estimates that production in Feb'21 and Mar'21 will remain in the range of 11-12 mn t per month. Jan'21 recorded a 5% m-o-m growth in production to 12.40 mn t in an unmistakable sign of improving supplies from the state.

In addition, SteelMint understands that a couple of leading merchant miners have exhausted their annual EC limit which could put additional pressure on iron ore supplies from the state. This could account for the projected marginal dip in Feb'21 production to 11 mn t. However, operationalisation of a couple of auctioned leases by state PSU miner OMC is likely to cover up for any deficit thus caused. Moreover, allocation of significant quantities from these mines at OMC auctions point to speedy dispatch of iron ore from these leases, SteelMint believes.

Improving supplies from other states:

All in all, Odisha's share in India's total production is projected to stay above 50% in FY21. Karnataka is expected to clock production of 34 mn t in FY21, with monthly production in the rest of the fiscal likely to remain in the vicinity of 2.8-3 mn t. The restart of NMDC's Donimalai mine is expected to augment supplies. The Supreme Court has put an annual cap of 35 mn t on iron ore production in the state.

Chhattisgarh is expected to produce around 36 mn t of iron ore in FY21, with monthly production averaging 4.2 mn t for the rest of the fiscal. On the other hand, production from Jharkhand is anticipated to touch 21 mn t in FY21. While production in Jan'21 was 2.21 mn t, in the two remaining months of the current fiscal production is likely to remain in the region of 2-2.2 mn t, as per SteelMint estimates.

Outlook:

New mines coming online and enhancement of production from the auctioned leases are likely to further contribute to recovering supplies. India's leading iron ore miner NMDC as well as Odisha miners have slashed prices, as supplies have picked up pace. However, demand remains strong with the economy bouncing back after the pandemic; analysts are predicting a 15-17% jump in steel consumption in FY22.