Odisha iron ore mines may start production in Jul-Sep

Iron ore production may increase in Odisha, India's largest iron ore producing state, over the July-September quarter as new leaseholders complete various procedural formalities and start operations.

Production has slowed considerably since 1 April as mining leases of previous leaseholders expired on 31 March 2020. Captive mines, such as those owned by Tata Steel, Jindal Steel and SAIL, as well as mines of the state government-owned Odisha Mining Corporation remain operational.

Odisha has auctioned off 23 existing and operational merchant mines whose leases expired in March. The auctions were successful in attracting several bidders, including marquee companies such as ArcelorMittal, Vedanta and JSW Steel, with the significant premium being paid for acquiring mining rights. The auction of a pending mine, Badampahar, is currently underway. JSW Steel has bagged four mines, more than any other company at the auctions.

Signing of a mining development plan and initial payment for acquisition of mining leases are likely to be completed in early July after which mining companies can start operations, said an official of the Odisha mines ministry.

All of the companies that cast winning bids at the auction have been granted vesting orders by the state government, which transfers the right to the title of the mine from the previous leaseholder to the new owners. These owners will now have to fulfill all conditions required to execute the mining lease, including necessary payments to the state government, by June 26.

Larger companies such as AMNS India and JSW Steel may be looking to start operations in mid-July though full-scale operations at most auctioned mines may be able to start only by September, said market participants. Companies such as JSW Steel and AMNS India would use the ore for their own steelmaking operations, which may tighten open market availability of ores.

Merchant mining firm Serajuddin expects to resume operations by early July. The company has exhausted its mined stocks of iron ore and lump, said persons familiar with the matter.

Two of the auctioned mines, Essel Jhiling and RP Sao Guali, are under litigation.

There is also speculation that high prices most companies won bids at could lead to an escalation of iron ore prices in India as miners look to recoup costs. But miners may find it hard to lift prices and even have to sell at lower prices in the short term as the economic slowdown and labour shortages caused by the spread of Covid19 may continue to pressure demand from steel sector, which is struggling with lower sales and output.

Lower output in Odisha since April has not created a shortage of ore in the market as previous leaseholders continue to sell off a total 50mn t of accumulated stocks in domestic and export markets, said the government official. These stocks are likely to be depleted by 30 September, when the six-month grace period for old leaseholders to dispose their stocks ends, he added.