Goa iron ore miners feel the heat as prices hit 10-year low

As prices of lower grade iron ore hit a decade-low of USD 29 per tonne, Goan miners fear rates have not bottomed out yet and they expect a "bloodbath" in the next one year if counter measures are not taken.
Goa mainly produces low grade iron ore (with iron content between 55-58 per cent), which is mainly exported to countries such as China and Japan.
"The price of USD 29 per tonne CFR for 57 per cent Fe (iron) content is almost the lowest in the past decade... The prices were this low way back in 2003-04," industry body Goa Mineral Ore Export Association (GMOEA) President Shivanand V Salgaocar told PTI.

"Right now the situation is challenging. All the mining companies are looking forward to steady operations, but the current situation of weak iron ore prices due to sluggish demand from the international steel sector combined with high taxes is making mining operations unviable," he added.
Salgaocar, who is the Managing Director of Goa's leading mining company the V M Salgaocar Group, said the industry fears that prices of iron ore -- a key ingredient in making steel -- can still plummet.
"And prices may have not yet bottomed out. Imagine, the price of iron ore with 62.5 per cent Fe content have breached the CFR China price USD 40 a tonne mark (It was ruling at USD 140 about 18 months ago) and there are industry projections that this may breach the USD 30/tonne mark.

"Considering the persistent high weakness in the prices globally, we can expect a bloodbath in the next one year as far as supplies and consequently prices are concerned," he warned.

Expressing similar fears, GMOEA Honorary Secretary Ambar Timblo said: "Globally, buyers are getting better grades at competitive prices. So, why will they buy it from here (Goa)? We need to make the industry competitive as the time is now or else, I fear, the exports will not happen."
A top official from a leading miner from Goa, who wished not to be named, said mining operations at this rate are unviable, if the taxes continue.

"The taxes are adversely impacting the industry. If they continue I don't think mining operations will be economical. Already the industry is trying to come out of the three-year ban and start operations," he added.
In order to make the mining industry in Goa competitive, Salgaocar said the governments, both at the Centre and in the State, needs to remove the export tax and other state levies to make the industry compete.
Timblo, who is the Managing Director of another leading miner from the state Fomento Resources, said the rationality of export duty and other taxes does not stand in such a price environment.

There is a 5-10 per cent levy for DMF (District Mineral
Foundation) and 10 per cent on the export price for the Goa Mineral Ore Permanent Fund Scheme.
Goa's mining industry is urging the Centre to withdraw export duty on low grade iron ore stating it would help India to become competitive in the global market and earn foreign exchange from the commodity that has little domestic demand.
High taxes have adversely impacted business, especially when the international market is showing no signs of revival, they say.
"Even if export duty, permanent fund and transport cess are removed, our production cost will come down drastically. This will make us more competitive. We cannot check global prices but we can optimise our production," Timblo suggested.

Market insiders say that just removing the export duty and the Goa Permanent Fund will help in bring cost down by around USD 4.5 per tonne, a major factor that can help in making business viable.
"The government has to see the plight of the industry. No export from the Supreme Court-permitted 20 million tonne iron ore has happened so far. If the permanent fund and export duty continue, I do not see business to be sustainable even in the short term," Timblo said.
So far, the three top miners from Goa -- Vedanta's Sesa Goa, Fomento Resources and Salgaocar -- have exported around 6.7 lakh tonnes of iron ore, which they had procured through auctions conducted by the state government earlier this year.