India may start iron ore mine auctions in July: JSW

India is likely to start holding auctions in July for iron ore mines where leases will expire next year, leading to new owners taking over and minimising supply disruptions, said Seshagiri Rao, joint managing director at private-sector JSW Steel.

Mining leases at 59 iron ore mines with a total capacity of 85mn t/yr in the major producing states of Odisha and Karnataka are due to expire on 31 March 2020. The mines have combined production of around 60mn t/yr, according to estimates from ratings agency Fitch's India Ratings subsidiary. None of these mines has yet been put up for new auctions, after which it would typically take 2-3 years for operations to start once regulatory clearances are received. Indian steel mills may have to raise imports significantly if these mines halt operations when the leases expire.

The mine auctions in both Odisha and Karnataka should start in July, Rao said. The governments of both these states are aware of the issues and have taken steps to expedite the auction process, he added.

JSW Steel, which is India's second-largest steel producer and largest buyer of iron ore, meets most of its ore requirements through purchases from domestic merchant mines and via imports. The company expects its five captive iron ore mines in the southern state of Karnataka to produce 5mn t of iron ore in the 2019-20 financial year started 1 April, up from 1.8mn t in 2018-19. The company's iron ore requirements are likely to be 31mn-32mn t in 2019-20.

India's iron ore production is likely to rise in 2019-20 from a year earlier as mining companies try to maximise production and boost profits before the leases expire, Rao said. India produced around 220mn t of iron ore production t in 2018-19, he said.

Odisha-based mining companies are claiming they already have 127mn t of stocks at mines while Karnataka has around 10mn t, Rao said. "Even assuming there will be a disruption or a problem, all these issues, there is iron ore available in the mines that can be moved in that event. That is one comforting factor," he said.

Governments will also give existing mining companies time to lift ore held at the mines after 31 March next year he added.

Imports are always an option for JSW Steel, Rao said. The company was India's largest iron ore importer in 2017-18 and 2018-19, taking millions of tonnes of mainstream low-grade fines from Australia.