India’s NMDC plans sharp increase in iron ore output

India's state-controlled NMDC plans to lift its iron ore output significantly in the 2020-21 fiscal year starting 1 April, anticipating robust sales and higher prices on the back of a supply shortage.

NMDC, India's largest iron ore producer, is planning an output of 48mn t in 2020-21. The company produced 22mn t in the April-December period of the 2019-20 fiscal year, up by around 0.7pc from 21.85mn t in the same period a year earlier. Total output in 2018-19 was 32.38mn t.

Strategy and detailed plans for increasing output have been worked out and the production target has been proposed to the steel ministry for its approval, said NMDC chairman Baijendra Kumar.

Domestic iron ore prices have increased by 8-30pc in January as mills and pellet producers stock up in anticipation of a squeeze in supplies post-March 2020 when several mining leases of private merchant mining firms will expire. Recent gains in steel prices have also supported iron ore markets.

"NMDC needs to gear up for opportunities coming its way post-March 2020 and should work on an aggressive growth plan to meet the demand of the domestic iron and steel industry," Kumar said earlier in December.

NMDC's plan to lift its iron ore output hinges on its ability to restart the 7mn t/yr Donimalai iron ore mine in the southern state of Karnataka, which has not been in operation for more than a year because of a royalty dispute with the Karnataka government.

A court has ruled in favour of NMDC in the dispute, while Delhi has recently made it mandatory for state governments to renew state-run companies' expiring mining leases by an additional 20 years. "NMDC is very sure of starting operations at Donimalai very soon. Legally and morally NMDC is on the positive side," said Kumar. But he has not received any communication from the state government yet on the lease renewal.

Securities broking firm IDFC has forecast NMDC's 2020-21 output at 38.8mn t, expecting Donimalai to be restarted soon.

By Prasenjit Bhattacharya

source: Argus Media