The Indian government may replace the flat tax on exports of iron ore with one linked to the grade of the mineral after some Chinese steelmakers boycotted purchases of the commodity from the South Asian nation. | |
| "The government could restructure the tax in terms of iron ore grades where a lower grade may have a reduced duty with some adjustments for higher grade ore," A S Firoz, an independent steel analyst and former chief economist at the country's steel ministry, said today in Singapore. |
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| The new tax has prompted at least 10 steelmakers in China including Baosteel Group Corp, the country's largest, to halt purchases from India, an industry group said on March 31. Iron ore exports may tumble 32 per cent this month because of the levy, according to the Federation of Indian Mineral Industries. |
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| A lower tax on iron ore fines, a grade which has a lower ferrous content and accounts for 85 per cent of India's exports of the mineral, may deter Chinese mills from seeking more supply from Australia and Brazil. India was the third-biggest supplier to China in last year, providing 23 per cent of 326 million tonnes of imports by the world's biggest steel-producing nation. |
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| "China needs a lot of iron ore and it cannot afford not to buy from India because it takes a while to mine, and it takes time to find substitutes,'' said Firoz, who is on a sabbatical after working 15 years as an economist at the steel ministry. |
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| Chinese steelmakers may import 4.3 per cent more iron ore and 7.4 per cent in 2008, Citigroup said in a March 6 note. Steel output in China rose 23 per cent to 74 million tonnes in January and February this year from a year ago, the National Bureau of Statistics said on March 15. |
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| India's government on February 28 announced a tax of Rs 300 ($7) a tonne to ensure supplies are enough to meet domestic demand. |
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| Finance Minister Palaniappan Chidambaram said on March 16 that the government would consider fresh comments from the country's iron ore industry and may "take a suitable decision" on the tax. |
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| A panel set up by the government to overhaul India's mining laws had suggested a tax on exports of high-grade iron-ore lumps, instead of fines, because of poor domestic demand for the latter, the trade body has said. Steel Authority of India and Tata Steel, the country's biggest producers, mine their own ore, forcing miners to export fines. |
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| Out of every 100 metric tonnes of iron ore produced in India, 60 tonnes are fines and the rest are lumps. |
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| India's steel usage is forecast to rise 7.7 per cent a year from 2010 to 2015, faster than the 4.2 per cent global rate in the same period, as economic expansion stokes demand for cars, homes and appliances, according to the International Iron & Steel Institute. |
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