A quantity loss from Brazil will probably be met through Australia.
With infrastructure bottlenecks dogging iron ore exports, India is unlikely to benefit from the supply deficit from the proposed export tax levy in Brazil, the world’s second-biggest exporter of the steelmaking raw material after Australia.
Brazil’s energy and mining minister Edison Lobao, on Tuesday, had hinted that the government may levy export duty on ore to promote their domestic steel industry. Brazilian President Luiz da Silva is pursuing Vale SA, the world’s largest iron ore miner, to consider creating jobs locally by spending immensely on steel plants. Instead of supplying ore to outside mills, the country should focus more on processing of iron ore locally to produce steel, he had said recently.
Vale has since made plans to invest about $17 billion on steelmaking locally through 2014.
According to the minister, Brazil is considering imposing an export tax on iron ore and removing taxes on finished and value-added goods such as steel and steel plates.
The secretary-general of the Federation of Indian Mineral Industries, R K Sharma, gave two reasons for India’s limited potential to gain much from a gap created by Brazil. First, India does not have adequate infrastructure to handle larger ships. Second, supply from India usually just fills the gap between supplies from Brazil and Australia. Hence, a quantity loss from Brazil will probably be met through Australia and India’s export is unlikely to cross 110 million tonnes, Sharma added. For several years, India’s ore exports have been between 100-110 million tonnes.
Indian mining companies pays a five per cent duty on exports, which they expect will go up to 20 per cent in the coming Union Budget later this month. This will make iron ore costlier, also indicated by rising steel prices. The average price of ore with 63 per cent of iron content at Chinese ports from India has risen recently to $124.5 a tonne from $122.5 a tonne.
“We are supplying ore only to small steel mills (there), as large mills continue to import in huge quantities from Brazil and Australia,” said Haresh Melwani, CEO of H L Nathurmal & Co, an ore miner and exporter based in Goa.
China, the world’s largest steel producer, has an ambitious plan to produce in excess of 600 million tonnes of steel this year, which will require over 700 million tonnes of iron ore from abroad.