The country's iron ore production rose to a decade high of 220 million tonnes (MT) in FY19, growing 9.5 per cent year-on-year from 201 MT in FY18.

Analysts are betting on ore output continuing its growth momentum in this financial year too. Their positive sentiment springs from merchant miners looking to accelerate extraction from their mines headed for expiry by March 31, 2020.

"We believe production (of iron ore) is likely to go up this fiscal between five and eight per cent. Merchant miners whose lease validity ceases by March 31, 2020 will be looking to ramp up output. On the imports side, we expect moderation during FY20. Exports, on the contrary, should go up for iron ore pellets", said Vahishta M Unwalla, Research Analyst – Iron ore, CARE Ratings.

Merchant miners are scrambling to maximise output and produce up to the limits approved under environment clearance. According to a report compiled by a committee of the Union mines ministry, 334 merchant or non-captive mining leases are due to lapse by March 31, 2020. Of this, only 49 mines are operative - 33 of them are working iron ore mines in Odisha, boasting of an annual production capacity of 55 MT. Merchant miners going on an accelerated spree reflected in FY18 as well. The phenomenon was strikingly noticed in Odisha, the state which produced 118 MT of iron ore and despatched even higher at 140 MT.

“During this financial year, iron ore production is likely to register eight per cent growth. We anticipate a production surge from the merchant miners whose mines would no longer be valid after this fiscal year end. Moreover, merchant miners will have the latitude to despatch ore even six months after the lease tenure expires”, said a source at Pellet Manufacturers Association of India (PMAI).

Indian iron ore producers are also set to profit from global tailwinds. A study by CARE Ratings illustrates that the spike in global seaborne iron ore prices will shore up the country's iron ore demand.

“Recent iron ore supply disruptions due to Vale’s dam collapse have created a shortage of 60-70 mt globally. With elevated global prices, demand for domestically produced iron ore is expected to rise. This shall keep domestic prices elevated during the year”, the report noted.

As demand for iron ore pellets of Indian origin vaults in international markets, this will lead to enhanced production back home. “Domestic production of pellets is expected to ramp up with an increase in demand in domestic market as well as international markets, especially China. Quantity of exports shall vary depending on the premium offered in the international market to Indian pellet manufacturers”, the report from CARE Ratings adds.

Besides pellets, the demand for low grade iron ore fines has also shot up with the hardening of prices. Benchmark prices of 62 Fe grade iron have tumbled below $100 per tonne after hitting multi-year highs. Even the prices of baser grade iron ore (Fe content less than 58 per cent) had swollen to $85 per tonne, prompting high volume of shipments from India. China's steel mills have shown proclivity to buy Indian pellets as well as low grade iron ore after mine disruptions in Brazil and Australia spooked supplies.

Exports are seen reviving on the back of a firm Chinese demand, reversing a lacklustre trend for the past two years in succession. FY18 saw exports tumbling 21 per cent. In FY19, iron ore exports took a deeper dive, nosediving 33 per cent to 16.2 mt.