Monday, 11 Jul 2011
Reuters reported that India's southern Karnataka state has not issued permits to export iron ore more than two months after a ban on shipments of the steelmaking raw material was lifted.
India's Supreme Court ordered Karnataka to lift a ban on iron ore shipments, in place since July 2010 as part of a crackdown on illegal mining, from April 20th 2011. But the state is yet to allow any export, raising concern among miners there.
Following are some questions and answers about the issue:
Why the delay in resumption of exports from Karnataka?
State government officials have said they are unlikely to allow exports of iron ore unless the Supreme Court appointed Central Empowered Committee completes its survey on illegal mining activities. There is no timetable given on when the survey will be finished. The CEC, along with the local forest, revenue and mining departments, is surveying Karnataka's mining areas to check on illegal mining. Without the committee report, even iron ore bound for steelmakers in India cannot move out of the state.
State officials have given several deadlines for issuing the permits but they have all passed without any exports happening. Miners have largely blamed the delay to a political battle between the federal government and India's main opposition party, which rules Karnataka.
What are miners doing about the delay?
Mineral Enterprises Ltd, one of two miners who contested the ban in the Supreme Court, said it will file a writ of mandamus and contempt with the court this week, hoping to force the Karnataka state to allow exports to resume immediately.
The miner estimates that there are around 25 million tonnes of iron ore lying in stockyards and mines of exporters and faced the risk of getting eroded due to the monsoon rains. The volume roughly amounts to a year of iron ore exports from Karnataka.
Is it affecting iron ore prices?
The delay in resumption of shipments is not affecting iron ore prices which are currently stuck in tight ranges around USD 170 a tonne after falling to three month lows in June.
A key reason is a seasonal slowdown in Chinese steel demand due to thinner construction activity in summer, muting any impact from a tight supply condition. Traders also say increased cargoes from Australia and Brazil, the two biggest iron ore exporters, are offsetting the effect of tighter supplies from India during the seasonal monsoon rains that usually lasts through September or October.
Is it a concern for the market if exports do not resume?
Iron ore prices could get a boost if Karnataka is unable to resume exports even after the monsoon season is over in India. Further support for prices will come from China, where demand for the steelmaking raw material is expected to bounce back during the fourth quarter on pre winter stockpiling.
Robust Chinese demand amid tight Indian supplies helped lift spot iron ore prices to record highs near USD 200 a tonne in mid February before Chinese buying slowed as demand in the world's No 1 steel consumer was not as strong as many had thought.
(Sourced from Reuters)
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