India’s Steel Industry to Face Production Disruption in 2020

The shortage of domestic iron ore may lead to increased imports of the raw material, which in turn may lead to bump up in production costs.

SEATTLE (Scrap Monster): The recent report published by ratings agency India Ratings (Ind-Ra) warns of production disruption in Indian steel industry by 2020. According to them, delay in the auction of iron ore mines whose licenses are due to expire in March 2020 could hit the country’s steel production. Incidentally licenses of 288 merchant mines, including 59 operating mines are about to expire by March next year.

According to Ind-Ra, normal auction process takes three to six months to get completed, depending on time elapsed on obtaining environmental, wildlife and forest clearances. The general election, currently underway in the country, is likely to push the initiation of the auction process to the latter half of 2019. The formalities with regards to formation of new government at the Centre after the elections may push the process to the end of the current year. It noted that majority of the operating iron ore mines are situated in the states of Odisha and Karnataka. Delay in auction could disrupt production of approximately 60 million tonnes of iron ore from these mines.

The shortage of domestic iron ore may lead to increased imports of the raw material, which in turn may lead to bump up in production costs. Unlike steel producers such as JSW Steel, which has a beneficiation facility, smaller companies that operate away from ports are likely to face disruption in operations, the report says.

The projected disruption in steel production may derail the country’s goal of achieving 300 million tonnes per annum of steel production capacity by 2030, as outlined in the National Steel Policy (NSP).

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