India Mining Report Q2 2016: New research report available at Fast Market Research

From: Fast Market Research, Inc.
Published: Tue Apr 12 2016

India's mining sector will experience solid growth, primarily boosted by the country's positive reforms and vast mineral reserves. Despite this, the sector will continue to face challenges due to the country's i nadequate operating environment, mining royalties and low metals price s , which will prevent India from reaching its full growth potential.

Latest Developments & Structural Trends

India will continue to suffer from a persistent coal deficit over the coming years although the country possesses one of the world's largest coal reserves and has significant production growth potential. We forecast India's coal output to grow from 753mn tonnes (mnt) in 2016 to 1,014mnt in 2020, posting average annual growth of 7.6% during 2016-2020, a sizeable acceleration from an average growth of 4.5% annually during 2011-2015. This is because the Indian government has made great progress in improving coal mine production and coal offtake in recent quarters.

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We forecast India's iron ore output to grow from 159.9mnt in 2016 to 198.8mnt in 2020. This represents an average annual growth of 5.0% during 2016-2020, higher than the average contraction of 5.6% y-o-y over 2011-2015, following mining bans in the three largest iron-ore producing states of Goa, Odisha and Karnataka, which have since been lifted. Although the passing of the Mines & Minerals Development and Regulation Act will support India's iron ore output growth, weak iron ore prices will limit the sector growth outlook. We forecast iron ore prices to average USD52.0/tonne over 2016-2020, significantly lower than USD115.0/tonne during 2011-2015. This is due to oversupply from Australian miners and weakened Chinese demand for iron ore.

We forecast India's zinc output to grow from 913.1 thousand tonnes (kt) in 2016 to 1,312.7kt in 2020. This represents an average annual growth of 9.3% during 2016-2020, significantly above the average 4.2% y-o-y growth over 2011-2015. We expect zinc prices to average USD1,750/tonne over 2016 and USD1,850/tonne over 2017. Beyond 2016, we expect prices to gradually increase due to our forecast of deepening refined metal deficits over the coming years. We forecast prices to average USD1,874/tonne during 2016-2020, below the annual average of USD2,044/tonne during 2011-2015.

In January 2015, the Indian government issued an executive order to enable bauxite mining licenses to be awarded via auctions, replacing the old system where licenses were issued at the discretion of provincial and federal government. We forecast growth in Indian bauxite production to grow from 22.6mnt in 2016 to 30.5mnt in 2020, averaging an annual growth rate of 6.2% during 2016-2020, significantly higher than the annual average 5.8% growth over 2011-2015. India is the world's sixth-largest bauxite producer, at 9.0% of global output in 2015. Historically, bauxite production in the country has tracked aluminum output closely.

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