Iron ore exporters look at domestic mart to offset fall in global demand

Iron ore exporters are increasingly looking at the domestic market as demand for the ore witnessed decline on the back of sluggish demand from China, one of the major buyer of Indian ore.

The recent controversy over illegal mining in some of the major states of the country and lack of clarity over export tax on the commodity added to this trend as miners played safe by entering into supply contracts with domestic manufacturer than relying on exports.

“There are always two options before a miner. One is to export the ore to the international market which has a volatility risk, and the second is to enter into supply contract with domestic manufacturer,” R K Sharma, secretary general of Federation of Indian Mineral Industries (Fimi) said.

He, however, said that whenever there was a lack of demand of iron ore in the international market, some miners looked to the domestic market.

“There is nothing new in this phenomenon. But, miners have no option than to resort to exports as domestic manufacturers are not able to consume all the ore produced in the country,” Sharma added.

Iron ore prices plunged since April amid concern of slow global recovery and a switch from annual to quarterly contracts of iron ore in recent time.

Spot iron ore prices in Asian market after ruling high at $185 a tonne also dropped to around $140 a tonne on the back of sluggish Chinese demand.

This trend has its reflection as iron ore exports from the country declined by 15 per cent to 20.8 million tonnes during April-June period of current financial year from 24.5 million tonne a year earlier.

Further, recent controversy over illegal mining and steel ministry’s proposal to levy higher tax on iron ore has also negatively impacted export scenario from the country.

Even, some miners are of the opinion that increasing pellet plants in some of parts of the country is prompting miners to divert the commodity to these plants.

“Many miners are setting up pellet plants or sponge iron units in the eastern part of the country, prompting miners to divert the commodity to these units,” R L Mohanty, promoter of MGM Group, an Eastern-based iron ore mining company said.

Mohanty, who is also the secretary of Orissa Miners’ Association, said that though new units would absorb some quantity of iron ore fines, it would be difficult for miners to completely rely on domestic market.

However, other miners have a different view about this matter.

“While India produces close to 220 million tonnes of iron ore and consumes 90 million tonnes of it, miners don’t have an option than to export,” Rahul Baldota, executive director of MSPL said.

If domestic steel manufacturers are not able to use low grade iron ore, iron ore fines will have be exported to other countries, he added.