Indian iron ore loses out in china

Karnataka export ban, China’s stoppage of low-grade ores ensure steep fall.

India’s iron ore exports to China fell sharply in July. Reasons: China’s ban on low-grade iron ore imports and Karnataka’s move to ban exports from its ports.

The Federation of Indian Mineral Industries (Fimi) said exports to China fell around 30 per cent in July and predicted a further fall if corrective measures were not taken.

In April, China banned import of low-grade iron ore. Since India’s annual ore exports of around 115 million tonnes are largely (effectively 90 per cent) to China, the ban has hampered mining. Barring committed quantities for which contracts were signed at least two to four weeks in advance, no major deals have happened since April.

The second blow was struck by Karnataka. The state, with proven iron ore reserves of 9.03 billion tonnes, suspended exports last month. The state produces about 40 mt a year, of which only 15 mt is consumed by the local mills. Most of the remaining 25 mt is exported to China.

As a consequence, exports to China plunged 28 per cent to 4.74 mt in July. A further decline cannot be ruled out if Karnataka does not take back the ban, says Fimi Secretary-General R K Sharma. Mining companies have filed suits against the decision in the high court. The hearing is on Friday.

Chinese iron ore imports rose nine per cent in July to 51.2 mt, after three straight monthly declines. Stockpiles of imported ore at Chinese ports plunged 400,000 tonnes to 73.98 mt for the week ended August 13. Of this, Indian stocks fell 1.24 mt to 16.88 mt. India meets about 15 per cent of China’s annual iron ore demand of 700 mt.

India’s loss has helped two leading global suppliers that meet nearly 80 per cent of China’s iron ore consumption. For the week ended July 13, Australia’s share rose by 220,000 tonnes to 25.95 mt, 35 per cent of the total. Brazilian supply increased by 950,000 tonnes, finishing the week at 16.88 mt.

Goa exports about 30 mt low-grade ore annually, mainly on a spot basis. Since China stopped buying low-grade ore, miners in the state cut output drastically. About 70 per cent of Goa’s ore is exported to China (80 per cent of it is low-grade).

“Many new markets, including Angola, Iran, Madagascar and Mozambique, have emerged as a substitute to India. For China, supply restriction is not a problem, while for us, exploring new markets will be a herculean task,” said Haresh Melwani, CEO, H L Nathurmal & Co, a Goa-based miner.

India produced 218 mt iron ore in 2009-10, up from 215 mt in 2008-09.