Tata Steel resumed operations at one of its largest mines in India on Friday, ending a suspension that left the steelmaker facing an acute shortage of iron ore.

Mining operations in the eastern state of Jharkhand were halted by the state government in September pending the renewal of leases, forcing Tata Steel to import the raw material for the first time.

Production began on Thursday and the company is now ramping up processing, expecting to return to capacity by the beginning of next week.

“That’s a big boost for Tata Steel because they were buying the iron ore from outside,” said one Mumbai-based analyst. “Imports were much costlier.”

Tata Steel’s input costs rocketed and production was curbed in the quarter ending December as four other mines run by the group in the nearby state of Odisha were also suspended for a month until December 15. Local media reports estimate the company was forced to import some 5m tonnes of iron ore.

India has faced a severe shortage of iron ore in the past quarter on the back of similar suspensions at other mines across the country, including operations run by the Steel Authority of India (Sail), the country’s biggest steel group by volume.

Although domestic iron ore prices spiked, industry analysts had expected supply to increase following elections in Jharkhand, where the Bharatiya Janata Party (BJP) swept to victory in state elections last month.

In a statement to the London Stock Exchange this week, Tata Steel warned that the closures had hit “the stability of operations, cost structure and the profitability” of the company.

Shares in Tata Steel were up 1.6 per cent on Friday as production got under way at the Jharkhand mine, closing at Rs410.75.

“It’s a boost but the market never thought they will not get the mines,” says Sanjay Jain, an analyst at Motilal Oswal, the local brokerage, explaining the subdued reaction.

Supplies of iron ore from these crucial mines will provide a boost for the struggling Indian steelmaker, as it struggles to fight off competition from Chinese steel imports while hopes for a revival in European steel demand fade.

The group also plans to sell off a chunk of its European division to Geneva-based industrial group Klesch, following years of heavy losses since the group’s poorly timed purchase of Anglo-Dutch steelmaker Corus for £13bn in 2008.

Tata Steel shares have dropped 23.5 per cent in the past six months, while the broader Nifty index has gained 8.3 per cent.