Iron ore exports likely to decline 50% in march

India’s iron ore exports are likely to decline by 50 per cent this month due to lower demand from China, the biggest buyer, and discouraging sentiment for domestic mining companies.

“The 20 per cent ad valorem export duty levied by the finance minister in the budget is set to badly affect shipment of the steel making raw material. Since the proposed duty is made applicable from March 1, its implication will begin this month. We expect exports not to go beyond five-six million tonnes,” said R K Sharma, secretary-general, Federation of Indian Mineral Industries (Fimi), the apex industry body. In March 2010, India’s iron ore shipment was 13 mt.

Fimi data show ore exports declined in February for the eighth month ina row.

The downswing began in July 2010. Traders say it’s due to uncertainty in the global steel market and the reluctance of China, a prime importer, to take more from India at this stage.

India’s iron ore exports declined 18.6 per cent to 10.1 mt in February from 12.45 mt in the corresponding month of the previous year. Over the 11 months from April to February of the current financial year, total shipment abroad dived 18 per cent to 85.4 mt as compared to 104.1 mt in the corresponding period of the previous year. For the full financial year 2009-10, total ore exports were 117 mt.

Sharma believes the coming months are likely to remain challenging for both miners and exporters. Overall exports are expected to touch 90 mt this financial year.

Sharma attributes the fall to the Karnataka government’s decision to ban transportation of steelmaking raw materials outside the state. The state high court upheld the order and the matter has been appealed at the Supreme Court by mining companies. Yet, miners have already cut excavation capacity by 65-70 per cent in the state. The next hearing is on the coming Monday.

Chinese buyers procure around 90 per cent of India’s iron ore and are awaiting a further decline in prices, having slowed purchases. The prices of iron ore was at $170 a tonne on Wednesday, from a record $200 a tonne in early February.