Iron ore imports to India has been showing gradual upside for the past two years with volumes of 5.79 MnT in FY17 and 8.6 MnT in FY’18. Owing to suspension at few major mines in Odisha over delayed penalty payment in the illegal mining case pushed up import volumes by 49% in last fiscal. Operational Odisha mines and NMDC raised prices during the period of mines suspension. Less availability of high domestic ore resulted in increase in import volumes.
In FY18, India imported about 38% (3.27 MnT) iron ore from Australia, followed by South Africa at 2.78 MnT and Brazil at 2.19 MnT.
JSW Steel’s import volumes up 44% – JSW Steel remained the largest importer in FY18 and imported 5.1 MnT iron ore with major imports from Australia (3.02 MnT). As per reports, the steel maker imported majorly low grade ore from Australia. Other major importers were – Kamachi Group at around 0.71 MnT and Jindal SAW at 0.51 MnT. West coast and few South-India based steel units imported South African lump.
Will FY19 Indian iron ore import volumes hit FY15 mark? – In H1 FY’19 (Apr-Sept’18), the total imports recorded at 7.52 MnT, up by almost three folds as compared to imports for the same duration previous year FY’18 (Apr-Sept’17) which was at 2.57 MnT. Amid high domestic iron ore prices, major Indian mills preferred importing ore from Brazil, Australia etc. Till Oct’18, imports have already climbed to 8.54 MnT.
In another setback for domestic iron ore supply, operations at NMDC’s Donimalai mines in Karnataka have remained suspended. On 3rd Nov’18 NMDC lease got expired and was later renewed for the next 20 years but state govt has asked NMDC to pay 80% premium on iron ore sale value from Donimalai to the Karnataka state Govt. Amid levy dispute, mining operations are on hold and there is still ambiguity over resumption of operations. This might serve another reason for hike in imports.
As per our study, iron ore imports to India is expected to increase in last quarter of FY19, but will it hit back to 15 MnT levels ?
Which all factors may boost iron ore imports to India in coming years?
1. Odisha 2020 auctions may push up domestic prices: Nearly 80MnT iron ore capacity in Odisha is likely to come up for auction in March 2020 as per MMDR Amendment Act. This transitional phase may bring out some changes and tenure during transferring of leases might lead to increased imports.
2. Logistic Constraints: The unavailability of rakes adds on to preference for imports. Logistic bottlenecks leads to rise in landed cost of ore for steel plants and delay in deliveries on so they might prefer going for imports.
3. Iron ore imports at Goa: As per data maintained with SteelMint, since FY15 this is the first time Vedanta reported the imports of iron ore from any country due to mining ban in Goa. In Q2 FY19, Vedanta’s saleable iron ore production from Goa mines stood nil against 0.4 MnT in Q2 FY18, Y-o-Y. In Q1 FY19, it stood at 0.2 MnT. Production volumes come down sharply from Goa miners owing to cancellation of mining operations at 88 mining lease post 15th Mar’18 by the Supreme court Judgment on 7th Feb’18 until fresh environmental clearances granted.
Indian iron ore imports have witnessed sharp rise Y-o-Y and amidst the current prevailing scenario, imports are expected to rise further. The Goa miners are short of material and will preferably source from imports.
4. Steel capacity ramp-up plans – Major steel plants are into expansion plans which will further facilitate raw material requirement in India.
JSW Steel, India’s largest iron ore importer has plans to enhance capacity at Dolvi plant, Maharashtra from 5 MnT to 10 MnT by 2020. JSW plans to scale up its capacity at its Vijaynagar plant from 12 MnT to 18 MnT pa and then further to 18 MnT pa. Of the mines JSW won in the auctions might give a total of 5 MnT pa production, so to make up for the rest increased amount of iron ore requirement, it will depend on Karnataka, Odisha and imports.
The enormous expansion plans in steel manufacturing, accompanied by mines lease expiry and domestic bottlenecks are expected to pave way for Indian imports of iron ore.
5. Outlook for global iron ore prices subdued – If reports are to be believed, iron ore fines prices are expected to slide to USD 50/MT, CFR China on 2019-2020, lower than the levels they were in 2018. Cheaper global offers might also be a point of consideration for mills given the expectations in high domestic prices.
It will be interesting to see whether mills will substitute domestic ore with imported one and will volumes cross FY15 mark in 2-3 years down the line.
To get more insights on the Indian Iron Ore, participate in the 3rd Indian Iron ore and pellet Summit, 18-19th Feb 2019, Delhi NCR