Iron ore output to reach 210 million this fiscal: Indian Bureau of Mines

Higher production may see further price correction of the ore

Indian Bureau of Mines (IBM) has estimated the iron ore production in the country in the current fiscal at about 210 million tonne, 9 per cent more than the previous fiscal. Last year, the country had produced 192 million tonne of iron ore.

The projection of higher production has come as a relief to the steel industry which was feeling jittery over disruption in mining operations in Odisha and Goa during the year and its subsequent impact on the iron ore prices.

Odisha, which produced 102 million tonne iron ore, 53 per cent of the country's total iron ore output of 192 million tonne last year, is poised to retain the top slot this year as well.

By the end of last week, the state had produced 99 million tonne, two million tonne more than the output achieved in the comparable period last year and in the remaining days of this fiscal, the state is expected to cross the previous year's record, said an official source. On sales front also, iron ore despatches have gone up by 7.14 per cent to 120.63 million tonnes by the first week of March from 112 million tonnes in the same period of 20161-17.

Couple of months back, closure of some large mines in Odisha for non-payment of Supreme Court imposed compensation for illegal mining, contravening environment and forest approvals, had raised the spectre of iron ore supply deficit and pushed up the ore prices. Between October, 2017 and January 2018, iron ore prices had moved up as much as 60 per cent.

But most of these mines have now been allowed to restart operation after paying the compensation amount. In addition, a large mine of Aditya Birla group owned Essel Mining which was closed for last four years on regulatory issues has also been permitted to reopen. Together, 25 million tonne of iron ore capacity has been restored in the state over the past couple of weeks.

"The miners in Odisha have EC (environment clearance) for 142 million tonne iron ore production annually. So there is further scope to ramp up production in a conducive market condition", sad an official of a mining company.

Similarly, the Supreme Court in December last year relaxed the annual cap on iron ore excavation by Category A and B mines in Karnataka from 30 million tonne to 35 million tonne raising the prospect of higher ore output in the state.

In contrast, the Apex Court has ordered cancellation of renewed mining leases of 88 mines in Goa bringing to halt all iron ore extraction activity in the state from March 15. With the action coming late in the fiscal, it is unlikely to have much impact on the overall ore output in the current year, said an analyst. Besides, Goa iron ore mostly being shipped out, the development has very little impact on the domestic ore prices, he added.

Meanwhile, the prospect of higher production already has a cooling effect on the iron ore prices which had spiralled up during three months upto January, 2018. One of the big miner, NMDC has reduced its ore prices by Rs 100 per tonne couple of weeks back. Similar corrections are expected from Odisha miners when they go for renewal of sale contracts towards the end of this month.