India faces iron ore shortage

India is the fourth largest iron ore producing country in the world after Australia, Brazil and China with an annual production of 210 million tonnes. India has five main iron ore states. Among them, Odisha produces the most, contributing 52% of total production. The state produces mostly medium quality materials (i.e. 62.5% Fe) that are consumed domestically, and some lower quality materials that are either stocked or exported. Other iron ore producing countries are Chhattisgarh, Karnataka, Jharkhand and Goa. In Goa, most of the iron ore mined (20 million tonnes) is low grade and exported, but the Supreme Court has canceled all mining leases here since 2018 for environmental reasons.

India is generally self-sufficient in iron ore, as shown in the second graph above, which shows that imports are negligible compared to exports. However, this situation is likely to change, at least temporarily, due to iron ore auctions for the renewal of leases in 2020 in the key state of Odisha. These auctions will definitely affect mining in Odisha and India will have to import more iron ore when the auction is over.

As leases for major mining companies in the country expire on March 31, 2020, trading mining companies in Odisha, the vast majority of which expire on leases, have increased iron ore production to maximize production this fiscal year, the last fiscal year under current ownership. ... Although the domestic market is overcrowded and the international iron ore market is in short supply and is trading at over $ 100 /t, iron ore exports to India remain relatively low due to the 30 percent export duty imposed on ore from content of 58% Fe and higher. In contrast, there is no export duty on low grade ore and pellets, and these exports have shown some reaction in the current market.

Although there is currently an oversupply, following the auctions, we expect the deficit to be met by Q2 2020, when the relaunches of mines under new owners will be postponed due to lengthy forest /environmental clearance permits, from pollution control tips, mining plans. This deficit is likely to last for a long time.