Steel ministry mulls options for duty free export of higher grade iron ore

Lower-grade iron ore fines are piling up at mine heads with no demand in the domestic market

The steel ministry has set in motion a study on whether higher grade iron ore is being exported by passing off as lower grade material or pellets. Inferior grade ore with iron content up to 58 per cent and pellets are currently exempted from export tax while richer grade ore attracts 30 per cent duty.

The ministry has decided that consultancy firm Mecon will commission a study on the possibility of export of high grade iron ore lumps or fines (iron or Fe content above 58 per cent) either in the garb of low grade ore or as iron ore pellets, which enjoy export duty waiver regardless of the ore content. 

At present, iron ore with Fe content up to 58 per cent is exempted from export duty. Over the last six months, this baser grade ore has gained traction in the export markets after the crisis at Vale’s Brazil mines in January this year and operation of some key iron ore mines in Australia were hit by a cyclone. Chinese steelmakers have shown renewed appetite for buying lower grade iron ore fines after the environmental regulations did not turn out to be as stringent as anticipated. Buying inferior grade iron ore instead of pellets is helping Chinese steel companies to shore up their bottom line.

Lower grade iron ore fines is getting stacked up at mine heads with no demand in the domestic market. At the end of March, iron ore stockpile at mines is estimated to have reached over 150 million tonnes. Odisha and Jharkhand contribute nearly 80 per cent to the inventory.