~by SHUBHAM RAI

India’s total iron ore production volume, which had been on a continuous positive growth track since the past five years, saw a significant decrease this year. Production of this key steel-making raw material in India in calendar year (CY) 2020 touched 199.5 million tonnes (MnT) compared to CY19’s 235 MnT, dropping 15.1% year-on-year.

Odisha, India’s eighth-largest state (area-wise), took credit for the biggest chunk of the country’s iron ore production at 109.5 MnT or 54.9% in CY20 which accounts for more than half of India’s total iron ore production. But compared to CY19, in 2020, Odisha’s contribution to India’s total iron ore production decreased 18.28%.

One of the key reasons behind the fall in Odisha’s iron ore production is that a lot of time was taken up in  exchanging ownership of the auctioned mining leases.

Similarly, contributions of other major iron ore producing states, including Chhattisgarh, Karnataka and Jharkhand, have also gone down significantly. Chhattisgarh’s iron ore production dropped to 31.8 MnT in CY20, against 36 MnT in CY19.

Karnataka’s production volume dropped to 28.33 MnT in CY20, compared to 31 MnT in CY19 while Jharkhand’s production reportedly dropped to 24.70 MnT in CY20 against 27 MnT in CY19.

National Mineral Development Corporation (NMDC) Limited, India’s largest iron ore producing company, recorded 31 MnT of production in CY20. However, the last calendar year cannot be considered favourable for NMDC as the company’s total production dropped 4.91%. It is to be noted that this is the second consecutive year in a row when the company’s production volume has gone down. In CY18, NMDC produced 33.1 MnT of iron ore and in CY19, 32.6 MnT.

Indian government-owned steel making company Steel Authority of India Limited (SAIL) produced around 28.5 MnT of iron ore from its captive mines in the year under review. In comparison to CY19, SAIL’s production volume decreased 1.72%.

Captive miner Tata Steel increased its iron ore production by 12% from 25 MnT in CY19 to 28 MnT in CY20. However, India’s largest private merchant miner, Odisha-based Rungta Mines’ production dropped 50% from 28 MnT reported in CY19 to 14 MnT in CY20.

Exports

In CY20, India’s iron ore export performance improved greatly compared to CY19’s. Iron ore exports (including pellets) grew 67.9% on a yearly basis, reaching 53.88 MnT compared to the previous year’s 32.1 MnT.

Exports of iron ore (excluding pellets) grew 113.73% to 40.78 MnT while pellets exports increased a negligible 0.61% to 13.1MnT in CY20.

     Industry analysts believe that Indian iron ore exports picked up due to various reasons, including high global iron ore prices, falling iron ore inventory levels at Chinese ports, and material availability crisis due to the Covid-19 pandemic.

The yearly average global iron ore fines (Fe 62%) prices increased to USD 108/tonne (MT) cfr China in CY20 as against USD 93.5/MT cfr China in CY19. Also, prices had touched as high as USD 167/MT, cnf China, during the last month of CY20. Indian low grade iron ore export prices (Fe 57%) increased to USD 68/MT, cnf China in CY20 as compared to USD 62/MT, cnf China, in CY19.

In addition to high prices, iron ore inventory levels at Chinese ports witnessed a significant fall from 130 MnT at the beginning of CY20 to as low as 108 MnT by June 2020, as per SteelHome data.

Analysts also say that, this year, Odisha-based miners remained very active in liquidating their low-grade stocks. Iron ore exports from Odisha increased as 19 mining leases, which were put up for auction, were busy liquidating their inventories. The auctioned mining leases had roughly 40 MnT of inventory.

Coronavirus disease, a pandemic that shook the world, raised various concerns over the global availability of iron ore throughout the year. Amid rising Covid-19 cases at the iron ore mine in Itabira, Brazil, owned by Vale, Brazilian supplies of iron ore cargoes got impacted severely. Vale revised and reduced its CY20 production target to 300-305 MnT as against the previously set 310-330 MnT.

Top Buying Countries

As in CY18 and CY19, China continues to remain the largest buyer of Indian iron ore as well as pellets in CY20. In CY20, India’s iron ore exports to China increased by 97% to around 48.80 MnT against only 24.73 MnT in CY19. China alone accounted for a share of 91% in total Indian iron ore exports. After China, Japan is the second largest buyer of Indian iron ore with a share of around 3%, followed by Malaysia, Oman, and South Korea each with 1% share only.

Top Exporting Companies

In CY20, Rungta Mines secured the top spot by exporting 8.9 MnT of iron ore. Compared to CY19, the company’s iron ore exports increased 113% in CY20. S.M. Niryat is in the second spot with exports of 5.91 MnT followed by Jindal Steel & Power at 3.14 MnT. Interestingly, Odisha-based Kashvi Power & Steel Private Limited’s exports grew by a whopping 90% to 2.58 MnT last year from 1.36 MnT in CY19.

Top Exporting Ports

Paradip remained the largest iron ore exporting port in CY20. This year, the port’s iron ore exports increased 59% to around 20.98 MnT against CY19’s 13.22 MnT. Vishakhapatnam Port is in second spot at 7.37 MnT and Gopalpur Port in third, with around 5.67 MnT.

Imports

In CY20, India’s iron ore (including pellets) imports went down by a huge margin of around 65.4% to just 0.78 MnT. Out of this, pellets imports were recorded at only 0.33 MnT and iron ore (excluding pellets) imports saw a considerable decrease of 79.45% over the previous year.

Taking a look at the past five years’ data of India’s iron ore imports, it can be seen that India imported the least quantity of iron ore in CY20. According to industry analysts, higher landed cost of imported iron ore resulted in domestic steel mills preferring domestic substitutes of lumps and pellets, leading to very low imports reported in CY20. For instance, in CY20, average Odisha iron ore (Fe63 fines) prices were reported at around INR 3,200/MT.

The major share of iron ore and pellets imported into India in CY20 was from Bahrain and small portions from South Africa and Ukraine.

Around 63% of the total iron ore and pellets imported were by AM/NS India (a joint venture between ArcelorMittal and Nippon Steel), whereas the remaining small quantities were imported by Mono Steel and JSW Steel.

Hazira Port, located in Gujarat, witnessed the highest iron ore import volumes of around 0.33 MnT in CY20. Kandla Port was the second-largest importer at 0.20 MnT. Other ports observed very small quantities of iron ore imports.

Price Trends

The average annual prices of Odisha’s iron ore lumps of Fe63% (5-18mm) grade were at INR 5,300/MT in CY20, against INR 3,971/MT reported in CY19.

The highest price was recorded in the month of December at INR 8,800/MT, while the lowest price was observed in May-June at around INR 3,450/MT.


The average annual price of Odisha’s iron ore fines of Fe63% were at INR 3,200/MT. Prices peaked at INR 6,500/MT during mid-November, while the lowest was observed during May-June at INR 1,900/MT.

In Karnataka, the average annual prices of fines of Fe60% quality were at INR 1,980/MT while Fe63% lumps were reported at INR 3,320/MT.

 

The highest prices of Chhattisgarh’s iron ore fines and lumps were recorded in December. For Fe64% fines, the highest price was INR 4,610/MT and for Fe65% lumps (6-40mm), INR 6,040/MT. The average annual price of fines of Fe64% content was at INR 2,856/MT while the average annual price of lumps (6-40mm) of Fe65% was at INR 3,664/MT.

In CY20, pellets prices skyrocketed, touching their peak in the last week of December. Ex-Barbil prices hit INR 11,950/MT while around the same time ex-Raipur prices touched INR 11,525/MT and Durgapur’s, INR 12,075/MT.

Indian pellets exports remained on the higher side during Q2, CY20 due to a variety of reasons. As per analysts, dull Indian domestic demand due to the pandemic increased Chinese demand. There were supply constraints from Brazil amid rising Covid cases along with closures at the Timbopeba and Malaysian distribution centres for half of the quarter. All these factors impacted the global trade.

However, with gradual unlocking measures adopted in India, steel demand picked up, resulting in improved domestic pellets usage. Pellets prices in the domestic market surged, backed by tight availability of high-grade iron ore in Odisha, as the majority of auctioned mining leases were still struggling to resume production. Domestic pellets prices for Barbil increased from INR 5,625/MT (loaded to wagons) in June 2020 to INR 11,095/MT in December, 2020.