Iron ore exports drop 19% in 11 months

Low buying interest from China, falling prices, 5% export duty on pellets impact exports

India’s iron ore exports fell in February to about 889,882 tonnes, a decline of 16.5 per cent year-on-year. Pellet export shipments were completely absent in February and there was a notable drop in buying interest from China, which has built up heavy inventory.

During the period between April 2013 and February 2014, India exported 14.01 million tonnes compared to 17.36 million tonnes in the year-ago period, showing a decline of 19.3 per cent. Odisha alone exported about eight million tonnes during the first 10 months of the current financial year. By the end of this month, India’s exports could touch 15-15.2 million tonnes. In FY13, India had exported 18 million tonnes valued at $1.8 billion.

Following the introduction of a five per cent export duty on pellets, export shipments vanished from India in February, except for one cargo of Jindals, which seemed to make its way to its own plant in Oman. Although there were four offers in the market for Indian pellets, no deal concluded, leaving the cargoes unsold.

Currently, export duty on iron ore is 30 per cent. Recently, the government had imposed a five per cent duty on pellets.

“The major reasons for the drop in exports were China’s low buying interest in the backdrop of increasing port inventories. A combination of tight credit conditions, subdued steel demand and diminishing concerns regarding security of supply allowed the port stocks to breach the 108-million tonne mark, putting enough pressure on the iron ore prices. The lower prices were not seemingly in the interest area of many suppliers who preferred to stay away from the market,” said Prakash Duvvuri, head of research, OreTeam Research.

Iron ore prices in China have fallen, owing to the slow growth in Chinese steel demand and falling steel prices. The real estate sector demand has been very slow in China. As a result, prices of 63.5-to-63 per cent Fe grade have declined to $117 a tonne (cost and freight) in China and 58 per cent Fe grade to $100 per tonne. The prices are likely to fall further, he said.

The country’s all-time high exports came in the year 2009-10, when exports hit 117 million tonnes valued at about $10 billion. In FY13, Goa alone had contributed about 10 million tonnes of iron ore to the total exports.

In the coming days, the falling iron ore prices and limited storage space are likely to increase the pressure on traders to sell their iron ore but, at the same time, steel mills may be waiting for the market to hit rock bottom before buying. The mills know the port stocks are quite high; hence, they wouldn’t mind waiting for a bit more, OreTeam Research’s Duvvuri said.

The total exports in 2014 have added up to 2.453 million tonnes on the basis of the provisional data put together by OreTeam. Major exporters in February have been Rungta Mines (157,380 tonnes) and MMTC to Japan (206,700 tonnes).