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Indian Metals and Mining Industry Analysis

November, 2020

Rise in infrastructure development and automotive production are driving growth in the metals and mining sector in India. India has a vast mineral potential with mining leases granted for a longer duration of 50 years. India has 1,356 active mines and produces 95 minerals - 4 fuel-related minerals, 10 metallic minerals, 23 non-metallic minerals, 3 atomic minerals and 55 minor minerals (including building and other minerals). India is expected to overtake Australia and the US in early 2020 to be the world’s second-largest coal producer.

India holds a fair advantage in cost of production and conversion cost of steel and alumina. India became the world’s second-largest crude steel producer in 2019 with production at 111.2 MT. Crude steel production and finished steel production stood at 108.5 MT and 101.03 MT, respectively, in FY20. In FY20, India had a total number of 914 steel plants producing crude steel. In January 2021, India’s crude steel production increased by 7.4% YoY to reach 10 million tonnes (MT), as per the World Steel Association (worldsteel).

The production of key minerals, which increased YoY in December 2020, included Limestone (10.1%) (333 lakh tonnes), Zinc conc. (8.6%) (131 thousand tonnes), Lead conc. (3.4%) (34 thousand tonnes) and Coal (2.1%) (711 lakh tonnes).

Exports of mica, coal & other ores and minerals including processed minerals stood at US$ 2,991.13 million in FY21 (from April 2020 to January 2021).

Coal production in the country stood at 730.87 million tonnes (MT) in FY20 and reached 620.10 MT in FY21 (as of February 2021).

Iron ore production in the country stood at 112 million tonnes  in FY21 (up to November 2020).

To increase availability of iron ore in India, the government took several initiatives, such as ‘Mining and Mineral Policy’ reforms, to ramp up production and maximum capacity utilisation by government mining companies. For example, SAIL, with the approval to sell 25% fresh fines and 70 MT dumps and tailings, accelerated sale of iron ore.

Demand for metal and metal products is rising in the domestic market, with India focusing to expand its domestic manufacturing.

In March 2021, Coal India Ltd. (CIL) approved 32 new coal mining projects, of which 24 are expansion of the existing projects and the remaining are greenfield. Estimated cost of the project is Rs. 47,000 crore (US$ 6.47 billion).

In February 2021, two new iron ore mines were inaugurated in Odisha, with a production capacity of 15 lakh tonnes per month and ~275 million tonnes of consolidated iron ore reserves. These mines will bring in ~Rs. 5000 crore (US$ 679.28 million) in annual revenue for the state and employment opportunities for locals.

In February 2021, Coal India signed a contract with the Centre for Railway Information Systems (CRIS) for tracking the movement of rakes laden with fossil fuel and coal despatch activity.

In February 2021, Energy Energy Efficiency Services Limited (EESL) and Coal India Ltd. (CIL) signed a memorandum of understanding for energy efficiency and resource management programmes to decarbonise CIL's projects and facilities.

In February 2021, CIL signed a contract with Belaz, a Belarus-based mining equipment manufacturer, for procurement of dumpers with an investment amount worth Rs. 2,900 crore (US$ 393.98 million).

In February 2021, CIL also announced plans to invest Rs. 1.43 lakh crore (US$ 19.43 billion) in 20 sir projects, including solar, thermal and aluminum projects.

Government of India has allowed 100% Foreign Direct Investment (FDI) in the mining sector and exploration of metal and non-metal ores under the automatic route, which will propel growth in the sector. Power and cement industries also aiding growth in the metals and mining sector. Given the strong growth expectations from residential and commercial building industry, demand for iron and steel is set to grow.

From April 2000 to December 2020, FDI inflow in the metallurgical industry stood at US$ 14,287.14 million, followed by the mining (US$ 2,897.03 million), diamond & gold ornaments (US$ 1,190.47 million) and coal production (US$ 27.73 million) industries.

In Union Budget 2021, the government reduced customs duty to 7.5% on semis, flat and long products of non-alloy, alloy and stainless steels to provide relief to MSMEs.

To boost recycling of copper in India, the government announced reduction of import duty on copper scrap from 5% to 2.5% in the Union Budget 2021.

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