Iron ore prices in Odisha, which is the largest iron ore producing state in India, has dropped 34% in last two months, as miners rush to increase production before their EC (Environmental Clearance) limit lapse for the current financial year.
Total EC limit for the state of Odisha is about 168 million tonnes (MnT), out of which merchant miners hold 136 MnT and rest by captive miners. Production has been recorded at 51 MnT during first 8 months (Apr-Nov’18) , which should have been 91 MnT.
Key merchant miners in Odisha are looking at scaling up their iron ore production in order to utilize their remaining Environmental Clearance (EC) approved for the financial year 2019 (Apr 2018 – Mar 2019)
- EC Limit: It is the approved production limit per year for each mine based on its mining plan
- EC limit will lapse if it is not utilized; it cannot be carried forward to next financial year
- In case, a miner excavates ore based on EC limit, the ore can be sold in the next financial year
- Miners would want to mine and stock iron ore, as most of these leases are expiring on March 2020 as per MMDR act
- Domestic Iron ore
prices have dropped upto 34% in last 2 months on supply pressure. Fines prices have come down by 34% while lump prices have come down by 25%
- Serajuddin, RP Sao, Essel Mining and Rungta mines production rate has been low in last 8 months (Apr-Nov). There is scope of incremental production to what they have produced on an average in last 8 months
- Miners may explore export opportunity to de-stock their ore. Rungta mines have increased their exports in last 3 months
- Odisha is the largest iron ore producing state with a share of over 50% (~100-105 MnT). Out of total production 75-80% comes from merchant mining
Will Iron ore prices continue to fall?
Ramping up iron ore output is likely to put iron ore prices in Odisha in coming months. It will be interesting to see how rising production & 2020 mine block auctions impact prices in near term.
To know more on domestic iron ore supplies and prices book your seat at the 3rd Indian Iron Ore & Pellet Summit to be held on 18 & 19 February, 2019 in Delhi NCR.