Steel Industry Stares At Production Disruption In 2020
Domestic steel production would be significantly affected if there is delay in auction of mines, which would complete 50 years of operations by March 2020, according to ratings agency India Ratings and Research (Ind-Ra). With around 60 million tonnes of actual production of iron ore from these mines likely to be disrupted, this would impact the credit profile of non-integrated steel players like JSW Steel, Rashtriya Ispat Nigam Limited and merchant miners. This could also trigger an increase in the imports though given the high cost of importing ore.
While the largest domestic miner, NMDC Ltd may be able to increase the volumes to 4-5 million tonne per annum (mtpa) with evacuation facilities being placed at its captive mines, its 7 mtpa Donimalai operations can re-start after the settlement of a dispute between the government agencies on premium payment.
Imported iron ore is at least 150% of the domestic procurement prices. India Iron ore imports are less than 10% of the overall requirement (estimated 13mtpa for 180mtpa requirement). The iron ore prices have already gone up due to the disruption at Brazilian mining major VALE Ltd, however the situation might normalise in the second half of FY20, as international prices soften due to improved global supplies.
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