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)

China may impost 5pct coal resource tax

Thursday, 27 Jan 2011

According to the latest statistics of Michael Cooper at Qin Huangdao port, China largest coal terminal, power coal with caloric value of 6,000 kilocalories per kilogram has recently stood at CNY 835 per tonne to CNY 845 per ton and that with caloric value of 5,500 Kilocalories per kilogram at CNY 785 per tonne to CNY 795 per tonne.
The FOB price of power coal at Australia and The Richards Bay remains at USD 113 per tonne and that at Indonesian ports USD 114 per tonne.

With the 17% VAT and all other charges considered, foreign coal is not at all competitive to domestic coal consumers. However, if domestic coal prices are 5% higher, things may take a turn and that’s exactly what the coal resource tax will probably cause.
Mr Xiexu minister of The Ministry of Finance said in an interview recently that the coal resource tax policy will be fully put into force in the coming five years. This raise concerns in the industry that the tax will add to resource costs and lead to increases of coal price. One obvious result may be that this may endear foreign resource to domestic coal consumers.

An expert from platts, an energy service provider, revealed that China was originally planning to impose 5 % coal resource tax from January 1st 2011, yet no announcement had been received from China’s National Development and Reform Commission so far. On that occasion there were coal dealers predicting that this may come to pass after the spring festival.
According to the above coal dealers, this may lead to a 5% rise in coal price and consequently foreign coal may suddenly become appealing to Chinese buyers.

Nevertheless, coal demand is sluggish now. Power groups had filled their warehouses with coal for further consumption. From a broader perspective, China’s economy is witnessing a shift in development mode, and this determines, on a broader sense, the growth of energy consumption will be milder. (Sourced from MySteel.net)Visit www.Mysteel.net for real time access to China steel news!