India: Iron ore exports to hit a new low in FY13

Monday, 13 February 2012

India’s iron ore exports are likely to hit a new low during the 2012-13 financial year and settle at about 40 million tonnes (mt), a drop of close to 35 per cent over the current year’s estimates. Exports are estimated to decline to about 60 mt in 2011-12 from 100 mt in 2010-11, a fall of 40 per cent.

“The decline in exports is mainly due to rise in export duty to 30 per cent and railway freight, which is highly discriminatory for exports compared to domestic freight rates. Before 2003, nobody bought low-grade ore from India. In the future, too, apart from China, nobody will buy low-grade ore,” said Basant Poddar, chairman, Federation of Indian Mineral Industries, South.

For example, the railways charge Rs 600 a tonne as freight for movement of ore for domestic consumption and Rs 2,800 a tonne for ore meant for exports. This has discouraged miners from exporting, he said. Another major factor for low exports is the ban in Karnataka. In addition, the stoppage of mining in Karna-taka, following the Supreme Court order in July, added to a decline in exports during the current financial year.

Orissa’s exports have come down mainly due to differential railway freight rates. Goa’s exports have also declined substantially this year and may settle at about 34 mt, down from 55 mt last year, he said. Karnataka’s share in national exports was about 35 mt till 2009-10. Since August 2010, there have been no exports from the state. Next year, India’s exports will touch the lowest level in the past decade.

“Demand from China is steady, but they are also getting ore from Australia and Brazil also. Australia and Brazil are together adding about 500 mt of exportable capacity in the next five years. Whereas, in India, we are closing our mines and losing our status as the third-largest exporter of ore in the world. We may drop to sixth or seventh position,” Poddar said.

During the current year, India’s share of exports in the world market is set to decline to about 10 per cent. In the next year, it is likely to further drop to about five per cent, at 35-40 mt. Prices of 63 Fe grade iron ore, presently at $130-135 a tonne on a FoB basis in the international market, are likely to go up 8-10 per cent during the current quarter, as the demand from China is picking up after the beginning of the new year. At the same time, Indian miners are losing their position due to various reasons, said Praveen Kumar, chairman, Maya Iron Ores, a derivative commodity brokerage firm.

“If the Supreme Court accepts the Central Empow-ered Committee’s (CEC) recommendation and puts a cap on the production of iron ore at 30 mt in Karnataka, investments in the steel sector will not only be affected, but it would also lead to loss of market share for India in the export market,” he said.
The loss means future investments to the tune of about $5-10 billion in the ports and railway sectors taken up on a public-private partnership basis will be in jeopardy, Poddar noted.

“The Indian steel industry uses high grade ore and there is no market for low-grade ore, due to poor technology with steel mills. So, why stop low-grade ore exports , which has huge demand from China? If we can’t export it, there will be a problem in managing low-grade fines and it would cause environmental damage,” he added. (sourced Business-Standard)

Goa miner want exclusion from export tax

Friday, 06 Jan 2012

Times of India reported that miner as well as the Goa Chamber of Commerce and Industry have taken strong objection to the iron ore export duty hike to 30% from 20% effective from December 30.

As per report, both Goa Mineral Ore Exporter's Association Goa Chamber of Commerce and Industry have written to the finance ministry Mr Pranab Mukherjee to roll back the hike for low grade ore from Goa.

Mr Manguirish Pai Raikar president wrote that "Though the ministry has not given any rationale behind the hike, we believe it is prompted by the major domestic steel producers and is intended to make export of iron ore less competitive so that ore can be made available for encouraging domestic production of steel. A hike on ore with Fe content over 58% may be justified as such ore is used by the domestic steel and sponge iron industries.”

Mr Raikar in the letter, forwarded as a press note, elaborated that domestic steel manufacturers use iron ore lumps, while Goa produces low grade ore consisting mostly of fines. The latter ore, including fines, cannot be pelletised and hence are not suitable for steel making.

Mr Raikar added that "At the moment, only China has the technology to enable use of these materials which are unwanted in India; and until such time as the technology comes to India, this export should really be incentivized and not taxed.”

He held that if Goan ore is not exported and thus converted to foreign exchange after undergoing the process of generating employment and tax revenues, and is not consumed in India, it ceases to become a strategic natural resource and loses all economic relevance. Mr Raikar stated that "The low grade ore generated in the course of mining will then have to be treated as waste, raising environmental concerns in a tourist paradise.”

He further held that the low grade ore which competes for the Chinese market against ores from Australia, Madagscar, etc and is sold in the spot market may see clients opt for other players as Goa's pricing may be higher. This is especially since this is the second major export duty hike in this fiscal. Mr Raikar further stated that "This will make it difficult for us to negotiate long term sale arrangements so that mining investments, which are all long term in nature, cannot be planned properly.”

Mr Raikar concluded by pointing out that in the absence of any alternative use for low grade Goan ore, ore from Goa and Redi (southern Maharashtra) were treated separately in the export policy during earlier years and Goa should continue to be treated so.

Mr Glean Kalavampara secretary of GMOEA pointed out that no low grade ore is used by the domestic steel industry and even existing pig iron plants in Goa draw iron ore from Karnataka and elsewhere. He told TOI that "Logistically speaking, it is not practical or cost effective to transport ore from Goa to Orissa and other states where steel plants exist as there already exists surplus ore in those states.”

GMOEA too fears that Goa will lose out to Australia and Brazil who could easily increase their ore outputs and wipe Goa out.

(Sourced from TOI)

India iron ore exports seen plunging after tax rise

Tue Jan 3, 2012

* Exports seen at 5 mln T for Jan-March quarter
* 2011/2012 exports seen at 50 mln T vs 97 mln T pvs year
* Concerns policy volatility may hurt India's supplier image

NEW DELHI, Jan 3 (Reuters) - India's iron ore exports are likely to be 75 percent lower than previously expected in the quarter ending in March as a rise in export duties kicks in as part of the government's push to conserve supplies for domestic steelmakers.

Asia's third-largest economy announced a 50 percent jump in export duties on Monday to 30 percent, prompting traders to slash their forecasts for exports for the year to March 2012 to around 50 million tonnes from 65 million. That was already down from 97 million tonnes last year.

Given that India had exported about 45 million tonnes in the nine months to December, it is likely to ship only another 5 million tonnes in the three months to March 31, top industry body, Federation of Indian Mineral Industries, said on Tuesday.

India is one of the world's biggest exporters of iron ore, with much of it bought by China, which has the world's largest steel industry. The shortage is expected to push up global prices by 7 to 10 percent over the current $140 a tonne, traders said.

"We are shocked at the decision to hike export tax on iron ore as such volatility in policy does not promote India's image as a reliable supplier," said Glen Kalavampara, secretary of the Goa Mineral Ore Exporters' Association. Goa is India's biggest exporter of iron ore.

"Absence of supplies from India will help Australian and Brazilian suppliers to consolidate their domination of the global market."

Indian exports were already down around a third from last year primarily due to legal wrangling over stalled shipments from a key producing state and efforts to conserve supplies.

Shares in Indian exporters Sesa Goa and NMDC slid on Monday after the announcement of the tax hike but closed up on Tuesday on fund buying at lower levels.

Deutsche Bank sharply reduced its earnings estimates for Sesa Goa -- by 29 percent this fiscal year and by 24 percent for 2012/13 -- on Tuesday, factoring in the increase in iron ore export tax among other reasons.

Steel companies continued Monday's gains. Tata Steel Ltd rose 6.1 percent to 361.85 rupees. Credit Suisse upgraded the world's No. 7 steelmaker to 'neutral' from 'underperform', citing valuation comfort at current levels.

The government has shown an inclination to conserve resources, though it does not support a blanket ban on exports, largely because the domestic steel industry does not have the technology to use ore fines. India mostly ships fines to China.

New Delhi also hopes that sustained Chinese demand means buyers would be willing to pay a slightly higher price.

"We think global demand will be able to absorb a slight adjustment in prices on the upside, which leaves a bit of room for us to adjust duties," an Indian ministry official said.

GLOBAL PRICES

Chinese steel mills had been expected to replenish stockpiles before their New Year holidays, which start on Jan. 22. Chinese markets are closed on Jan. 2.

China's iron ore imports are expected to rise 6 percent to a record 720 million tonnes in 2012, according to a Reuters poll conducted in December.

India's government is trying to cut down on illegal iron ore mining and shipments but favours better tracking and monitoring along with higher taxes rather than blanket bans on exports. It last raised the export duty in February 2011.

In April, the Supreme Court overturned an export ban imposed by Karnataka's state government in July 2010, but shipments have yet to pick up because of administrative delays.

The court has itself banned mining in some parts of the state due to environmental worries and allegations of illegal mining, allowing only state-run NMDC to mine in the areas.

Such regulatory uncertainty deflates industry confidence of India being a stable supplier.

Indian exports could slump below 10 million tonnes within three years as more ore is earmarked for domestic consumption, according to David Flanagan, managing director of Australian iron ore miner Atlas Iron.

Indian ore exporters say the government policy makes little sense as domestic steelmakers can hardly use fines.

Moreover, India's steel demand is likely to grow by only 6 percent in the current fiscal year, nearly half the earlier forecast, as higher interest rates squeeze demand from the automobile and construction sectors.

"Low-grade iron ore should have been free for exports," Kalavampara said.

(sourced Reuters)

Indian iron ore exports in April to November dip by down 28pct YoY

Monday, 02 Jan 2012

Indian iron ore exports dipped by over 28% YoY to about 40 million tonnes in April to November 2011 following ban on shipments from Karnataka and subdued output in Goa. According to the data released by Federation of Indian Mineral Industries, iron ore exports from the country were over 55.5 million tonnes in the year ago period.

FIMI Secretary General Mr RK Sharma told PTI that "The decline in exports of iron ore is due to a number of reasons. The Karnataka ban comes on the top. Also, several mines in Goa are closed and the Odisha government has stopped giving export permits.” Iron ore exports from the country were not positive since the beginning of the current fiscal compared to the corresponding periods of the last fiscal. The most glaring fall was in August, when it came down by nearly 45% to 2.6 million tonnes from 4.7 million tonnes. November was equally bad as shipments dipped by nearly 44% to 4.7 million tonnes against 8.3 million tonnes recorded in November 2010.

India the third largest global exporter of iron ore, had exported 97.64 million tonnes iron ore in the last fiscal, down from 117.3 million tonnes in 2009-10.

(Sourced from PTI)

Government update on cargo handling at major ports in India

Thursday, 15 Dec 2011

A reduction in iron ore traffic driven by a mix of ban on iron ore exports and slower demand from China continued to pull down the total load handled at major ports in November.

During the month, the two key commodity groups that registered a decline in traffic handled at major ports were iron ore and coking coal. Major ports handled 45.67 million tonnes cargo, a 0.51% drop against the same period last year.

The reduction in iron ore export cargo of 2.6 million tonnes was more than the increased handling of finished fertiliser, container traffic and thermal coal during the month. These were the three commodity segments that got the maximum incremental traffic of 2.18 million tonnes to the ports during the period.

Cargo handling by major ports

	Nov 11	Change %(YoY)
POL	14.72	1.87
Iron ore	4.79	-35.4
Fertliser finished	2.01	69.52
Fertilizer raw	0.77	12.4
Coal thermal	3.89	14.88
Coal coking	2.03	-12.5
Container tonnage	10.01	9.3
Other cargo	7.41	1.9
Total	4.56	-0.5

(In million tonne)

On a cumulative basis, the major ports handled 370.68 million tonnes between April to November, registering a 1.33% growth. This was on the back of lower handling of iron ore, fertilizer and coking coal.

The slower growth at major ports is also due to higher cargo handled by non major ports administered by the state governments. The non major ports account for about 35% of total traffic.

(Sourced from BL)

Indian government update on export of iron ore

Tuesday, 13 Dec 2011

The Indian minister of steel Mr Beni Prasad Verma said that during the year 2010-11, 97.66 million tonnes of iron ore was exported out of the total estimated production of 208.11 million tonnes of iron ore in the country.

In a written reply in the Lok Sabha he said that out of the total export, only about 2.93 million tonnes (about 3%) of iron ore was of high quality (with Fe content 64% and above). The total domestic consumption of iron ore (including both private sector and public sector steel plants) during 2010-11 was estimated as 111.4 million tonnes.

The production of iron ore in the country is about double the consumption of iron ore by the domestic iron & steel industry and therefore, is sufficient to meet the present requirement of domestic iron and steel industry.

Mr Verma said that ministry of steel is of the view that iron ore, being a non renewable natural resource, should be conserved for long term utilization of domestic steel industry. The government has decided that conservation of iron ore resources of the country should be achieved not by banning or capping the export of iron ore but by taking recourse to appropriate fiscal measures.

Presently, an export duty of 20% ad valorem is levied on all grades and varieties of iron ore (except pellets).

Slowing global economy will affect Indian iron ore exports - Dr Firoz

Friday, Nov18, 2011

Painting a bleak picture, the steel ministry said that iron ore exports will be under pressure and overall growth of the industry may be affected due to global competition and market forces over the next five years.

Dr AS Firoz chief economist ministry of steel economic research unit said that it is not government policy but market forces that will result in a decline in iron ore exports from the country, which are currently pegged at 120 million tonne.

He said that "It (iron ore export) would decline to 30 to 40 million tonne by 2016.”

Dr Firoz said the steel and raw material industry was passing through a tough phase and new ideas are required to steer it ahead. He added that "Global economies are not doing well. The Chinese economy will also come under pressure, resulting in the reduced demand of iron ore, as it will also affect growth of the steel industry.”

The official claimed that "Even if there is a demand, the exports would be an unviable proposition, considering the infrastructural costs. If the price is USD 100 per tonne of iron ore, most of the mining companies could able to achieve only a break even adding that taking into consideration current road and railway freight charges, nobody would be making money.”

(Sourced from ET)

Export of iron ore from India to China

Tuesday, 23 Aug 2011

Mr Beni Prasad Verma minister of steel has said that the quantum of iron ore exported from India during the last two years and the price thereof is given below:

Indicative spot prices of 63.5/63% Fe iron ore fines for export to China

Year	Volume	April	July	October	January
2009-10	117.37	48	68	68	90
2010-11 (Provisional)	97.11	162	122	130	155

(Volume in million tonnes)
(Prices in USD per DMT FOB)
(Source: MMTC, Department of Commerce

Spot prices for shipments to China are for medium grade iron ore fines. These prices change on load port and transaction to transaction basis during the year.

In a written reply in the Lok Sabha Mr Verma said that the production of iron ore in the country is much more than that used by the domestic iron and steel industries and about 50% of the iron ore produced in the country is being exported.

Steps taken by Indian government to curb iron ore exports

Tuesday, 16 Aug 2011

India's iron ore exports, which fell for the first time in a decade last year, could halve over the next five years as the country feeds the expansion of its steel industry.

Following is a timeline of key developments in India's iron ore sector since Karnataka, the country's second-largest producer, introduced its shipments ban:

July 26th 2010
Karnataka, ruled by the opposition Bharatiya Janata Party, bans shipments of iron ore. The state government had faced pressure from the ruling Congress led central government to clamp down on illegal mining. Exporters in the state subsequently challenged the ban.

September
Iron ore exports post their sharpest monthly fall in nearly two years after Karnataka's ban and slow China demand. Exports drop 47% from a year earlier to 3.03 million tonnes.

November 19
Karnataka's high court upholds the ban on exports.

November 23
Iron ore miners in the state say they will challenge the ban in the Supreme Court.

January 11th 2011
Top iron ore producing Orissa says it is considering seeking a ban on exports of the key raw material.

January 20
The Supreme Court delays its decision on the ban to mid February.

January 25
Indian railways announce an increase in freight costs on iron ore for export by 50% to INR 1,500 per tonne.

January 29
India's Multi Commodity Exchange and Indian Commodity Exchange launch the world's first iron ore futures contracts. But a ban on foreign players means liquidity is low.

February 10
Steel Authority of India wins environmental approval for its own iron ore mines in Jharkhand. SAIL says it will be operating in three years and will be key to its future iron ore supply.

February 11
The Supreme Court again adjourns its hearing on the Karnataka ban, this time to April 4.

February 18
Chhattisgarh joins Orissa in seeking central government approval to ban iron ore exports.

February 28
India hikes export duty on iron ore to 20% from 5% for fines and from 15 percent for lumps in its annual budget.

March 3
Freight rates are hiked again, this time by 100 rupees per tonne to INR 1,600.

March 30
Indian Railways says it will impose a "busy season" charge of 7 percent on iron ore freight rates from April 1 to June 30 and from Oct. 1 to March 31. The charge will equate to about INR 150 to INR 200 per tonne, one trader says.

April 5
Supreme Court orders Karnataka state to lift ban on iron ore shipments from April 20.

June 27
Iron ore exporter Mineral Enterprises Ltd says to call on Supreme Court to uphold lifting of the Karnataka ban which has been delayed by an inquiry into illegal mining.

July 27
An independent led inquiry implicates BS Yediyurappa chief minister of Karnataka, in a USD 3.6 billion illegal iron ore mining scandal.

July 29
Supreme Court imposes an interim ban on mining in the district of Bellary, a key iron-ore rich region in Karnataka, on concerns of environment degradation.

July 31
Yediyurappa resigns as Karnataka chief minister.

August 5
Supreme Court partially lifts iron ore mining ban in Bellary district, allowing state run NMDC to mine up to 1 million tonnes a month from Aug. 6.

(Sourced from Reuters)

Iron ore price negotiations - India and Japan to start price negotiations

Wednesday, 03 Aug 2011 | By BL

India will commence price negotiations with Japan for export of iron ore by National Mineral Development Corporation in the next few weeks, with the iron ore miner recently receiving the draft Cabinet approval on the estimated quantity of ore exports for the next five year period.

An Indian delegation, comprising senior officials from the ministry of commerce, ministry of steel, canalising agency MMTC and NMDC, will be participating in the price negotiations. The prices are fixed in line with the prices for Australian and Brazilian exports.

NMDC which has been indicted by the Karnataka Lokayukta for under invoicing its exports to Japan and South Korea between 2006-07 and 2009-10, has received approval to export 3.3 million tonnes of ore this fiscal, as part of the new five year contract. The last contract expired on March 31st 2011.

Karnataka iron ore exporters seek permits

Tuesday, 26 April 2011 11:00

Iron ore traders in Karnataka said they had applied for export permits to test the market and the administrative system as a nine-month ban was lifted temporarily by the Supreme Court.


On 5 April, the apex court ordered the state government to lift the ban with effect from 20 April on movement of iron ore meant for exports and said the next hearing in the case of exporters versus the state government would be held in the first week of May.

“It is risky no doubt. What will be the final outcome of the case, we are not sure, but we want to move the material,” said K. Somasekhar, managing director of ILC Industries Ltd, a large miner-cum-exporter in Bellary district.
Somasekhar said the department of mines in the state had not given the permits. “They are giving some excuse or the other,” he said.

Karnataka, the nation’s second largest iron ore producer after Orissa, accounts for about a quarter of India’s total iron ore exports of over 100 million tonnes a year.
But the state government under the leadership of chief minister B.S. Yeddyurappa banned exports of iron ore from 10 ports in July last year and subsequently stopped issuing transport permits for the commodity to be moved to other ports for exports, citing a drive against illegal mining and the need to preserve the resource for local steel firms.
“The (foreign) market is alright. Today we haven’t got the permit. Tomorrow and day after are holidays. Let’s see if we get it on Monday,” said Rahul Baldota, executive director at MSPL Ltd, one of the petitioners challenging the ban in the Supreme Court.
A metals analyst at a foreign institutional brokerage, said that exporters were also under pressure to reduce inventories before the monsoon, which runs June to September, and, therefore, had applied for export permits, even though chances of the ban getting reinforced could not be ruled out with the case still not over.
“I think miners will make the most of any temporary relief to exports,” the analyst said. He declined to be named.
In a separate matter that has a bearing on the case, a Supreme Court-appointed committee last week recommended a crackdown on illegal mining in Karnataka, including cancellation of mining leases.
The Central Empowered Committee indicted the Karnataka government after it found that the administration officials aided in illegal mining. The case will come up for hearing in the weeks ahead.
Developments in Karnataka are being watched in the international iron ore market, where India is the third largest exporter behind Australia and Brazil. Indian miners mainly supply to China, which has the world’s largest steel industry.

Indian steel makers have campaigned against iron ore exports as they want more of the resource available to them locally at low prices, but the miners contend that most local plants do not have the technology to use the powdery fines that are a by-product of lumps.

Iron ore prices on Thursday were at $185 (Rs.8,196) a tonne with freight for the benchmark 63.5% grade, less than the $200 a tonne level seen early this year. It’s still more than 13% higher than $163 a year ago owing to improving demand from China.

Source: Livemint

India's iron ore exports seen less than 100 mln T-Sesa Goa

Wed Mar 23, 2011 6:13am GMT

* Spot iron ore prices have fallen 14 pct from mid-Feb
* Slower China, Japan demand weighing on prices

BEIJING, March 23 (Reuters) - Iron ore exports from India, the world's third-largest supplier of the steelmaking material, will be less than 100 million tonnes in the next fiscal year starting April if prices stay at current levels, a top executive at Sesa Goa said on Wednesday.

India usually exports about half of its annual iron ore output of around 200 million tonnes, most of them going to China.

"Iron ore exports from India will be less than 100 million tonnes if prices stay at current levels," P.K. Mukherjee, managing director of top Indian iron ore exporter Sesa Goa, told reporters at an industry conference.

Spot iron ore prices .IO62-CNI=SI have fallen 14 percent since hitting record highs in mid-February as thin steel demand in top consumer China slowed buying by Chinese steel mills.

Worries that demand from disaster-hit Japan may also slow in the near term before a reconstruction-led rebound has also weighed on iron ore prices.

Iron ore prices surged more than 40 percent in 2010 on booming demand from China, prodding global producers in Brazil and Australia to boost output.

But India's iron ore exports fell for a seventh straight month in January because of a ban on shipments from its key Karnataka state and exports are seen falling further due to a four-fold rise in export tax.

India's iron ore exports are likely to fall 35 percent to about 58 million tonnes in the next fiscal year due to the curbs and the increase in taxes, R.K. Sharma, secretary-general of the Federation of Indian Mineral Industries, said earlier this month.

Iron ore from India has been quit

Friday, 04 March 11

Handy

Activity has been gradually rising in the Atlantic but it is mostly confined to the USG market. Short period basis redelivery Atlantic has been reportedly done at usd 24,000 pd delivery USG. The Cont/Bsea remain quiet with little activity which is forcing tonnage to ballast towards Gib. Many Owners are still reluctant to trade Suez or Aden. A 50kdwt blt 03 was reportedly fixed at around usd 20k pd dely Cont via CGH to FEast. Mkt remained firm in Pac. Supras in North China are fixed at close to 15k for trips via Indo to India with coal. Iron ore from India has been quiet with recent 20% export tax and mkt looks uncertain. Supras on WCI and ECI close to 17k for trips to China. On Richards Bay rnds supras now seeing around mid-teens. Red Sea, ferts on hmax/ supras are fixed at very high 20´s pmt on voy bss to WCIndia. Owns have been rating close to mid 30s due to increased piracy threat and bunker prices. Not much seen on short period as rates are seen rising and now around usd 17k.

Panamax
With lack of fresh grain business from USG or ECSA the sentiment is looking bit toppish leading to a slow decline in rates and interest for period. In the USG/ECSA area a majority of March cargoes seems to be fixed adding pressure to the Fronthaul rates. Mid week fixtures for same in the 25,000 + 600,000 GBB area. Atlantic business after a fairly steady week also under pressure with oversupply of spot tonnage still levels hovering around 15,000/Day. In the Pacific rounds fixed at USD 13,500 levels and some healthy fixtures for ECSA rounds still reported at high teens basis India-SE Asia delivery. Short Period fixed at 17,500, and 1 yr at 16,000 prompt delivery Far East.

Capesize
Two months into 2011 and we see the full effect of the sad reality describing the cape market. Last week bunker prices made a big jump,resulting in slightly improved rates but even more ships at anchor. West australia round is presently between USD 6.50 and 7 pmt, whilst fronthaul remaining steady around low USD 18. A lack of cargoes around and more tonnage coming suggesting the present poor market to continue for some time. (sourced:Fearnbul)

Indian iron ore exports to come down by up to 35pct - FIMI

Thursday, 03 Mar 2011, Press Trust of India

Miners' body the Federation of Indian Mineral Industries said as a fallout of the duty hike on iron ore exports in the Budget, India's outbound shipment of the key steel making raw material will come down by up to 35%.

Mr Siddharth Rungta president of FIMI told PTI that "Our logistics costs are already high. The rise in export duty will make it more uncompetitive. I sense iron ore exports from the country will dip by 30% to 35% on an annual basis as a result."

Mr Rungta said that the organization would request the government to reconsider its Budgetary proposal by highlighting possible fallouts of the duty hike move soon.

He said that "Because of the hike in export duty, no fresh contracts are signed now. Only earlier contracts are being honored. Though the impact of export duty hike is not being immediately felt, it will be felt within a month."

Mr Rungta said that the hike in export duty would also lead to lower domestic production of the raw material resulting to an increase in price. Though the cost of mining iron ore in India is more or less the same when compared with others in the global arena, handling and transportation cost here is far higher than other global producers.

While the finance minister Mr Pranab Mukherjee justified the move to increase export duty on the pretext of ensuring raw material security, FIMI maintain there would be no dearth of iron ore in the country for at least next 200 years as India has sufficient reserves to feed the domestic plants.

With steep rise in export duty, miners will have to depend on home market

March 1, 2011, 21:43 IST BS Reporter

Ore for exports will have to cater to domestic needs

The government has increased the ad valorem export duty on iron ore to 20 per cent — from five per cent for fines and 15 per cent for lumps. This has come as a major blow to the miners.

The government’s message, however, is loud and clear — value add or suffer. The move is seen as an attempt to force miners to sell more domestically rather than eye the international market.

Advisor, Federation of Indian Minerals and Industries (Fimi) S B S Chauhan said, “This is not good for exporters. Such a high duty cannot be absorbed by the sector and passing it on to the consumer is not an option since prices are a function of demand and supply in the international arena. Clearly, increasing the availability in the domestic market is the agenda and this will now happen.”

India exports close to 100 million tonnes of iron ore, majority of which makes it way to China. NMDC, India’s largest iron ore miner, exports 3 million tonnes to the Japanese and Korean steel mills and Sesa Goa, part of the Vedanta Group, is a major supplier to the Chinese market.

Senior vice-president at Edelweiss Capital Prasad Baji said the duty jump was too steep. “Ore pricing is related to the international market and India is a price-taker. In that sense, India really cannot decide on the price at which it would want to supply. Profitability will be hit if miners continue to export,” he said.

The move will complement steel production in India, which has grown over 6 per cent in 2010 while demand has grown at 9-10 per cent annually.

Chairman of Steel Authority of India (SAIL) C S Verma said, “Higher export duty on iron ore has been a long pending demand of the steel industry and the budget has taken care of the issue.”

Miners, who are investing in setting up pellet and sinter plants, have welcomed the withdrawal of export duty on the value-added iron ore, known as pellets. Chairman and Managing Director, NMDC, Rana Som said they were setting up two pellet plants with a combined capacity of 3.2 million tonne. “One million tonne will be used for internal use and the remaining is for commercial purpose,” he said.

“FIMI has been asking the government to remove the export duty on pellets. It is good for miners who are value adding and selling iron ore. Now, we will definitely see more investment in setting up of pellet plants,” said Chauhan. Iron ore, in its powdered form (fines), are fed into the pellet plant and converted into iron ore pellets and sold to steel makers. This product is then directly fed into the blast furnace to make steel, along with other raw materials like coking coal and limestone.

“China buys iron ore fines from India as the country has already invested in setting up of pellet and sinter plants. Therefore, they do not need much of pellets. However, there is some demand for iron ore pellets and this move will have a little positive impact for the companies looking to value add iron ore,” said Baji. (sourced:Business Standard)

Tags:iron ore miner, Indian iron ore exporters