Sinosteel blocks ore exports

Sinosteel Corp, China's second-biggest iron-ore trader, said it stopped buying iron ore from India after the government imposed a $7 a tonne tax on exports of the main steelmaking raw material.

"The tax makes Australian ores more competitive,'' Hong Sen Wang, managing director of the Indian unit, said by phone today from New Delhi. "We will reverse our decision as soon as the government takes the necessary steps.''

Indian mining companies estimate the tax proposed last week will halve iron-ore exports in the year to March 2008, boosting sales for producers in Australia. The government wants to curb exports to ensure there's enough to meet demand from steelmakers including Arcelor Mittal and Posco, who have announced plans to spend $21 billion on plants in the country. 
 

IN A TIZZY
In mn tonne	Production	Domestic consumption	Exports	Surplus
2000-01	80.76	36.02	37.27	7.47
2001-02	86.22	37.71	41.64	6.87
2002-03	99.07	40.94	48.02	10.11
2003-04	122.84	44.97	62.57	15.30
2004-05	145.94	48.15	78.14	19.65
2005-06P	154.43	52.23	89.27	12.93
Source: Indian Bureau of Mines, Nagpur, P: provisional

"It increases the appeal of cheaper Australian iron ore,'' said Mark Pervan, head of research at Daiwa Securities SMBC in Melbourne. "Australia sits on the doorstep of the Asian market. Brazil is unfortunately on the other side of the world.''

Lower imports from India may raise prices in China, which buys about half of the world's exported iron ore. India sold 74 million tonne to China in 2006, 84 per cent of the nation's total. Sinosteel buys 10 million tonne a year from India, Wang said.

"Though the cost increase of importing Indian iron ore will mostly affect medium and small-size Chinese steel mills that rely on the spot market to feed their demands, it will undoubtedly push up domestic iron ore prices,'' said Macquarie Research Commodities in a note dated March 2.

The duty, proposed on February 28 as part of the Budget, must be ratified by Parliament before it can be imposed. Australian iron ore accounted for about 40 per cent of the 326.3 million tonne bought by China last year. Brazil, which sold 76.4 million tonne, was the second-biggest supplier followed by India, Macquarie said.

"Australian iron-ore producers sit in the box seat given they are selling iron ore to China at $20 a tonne cheaper than the Brazilian and the Indians,'' Pervan said.

Exports from India, which holds the world's fifth-largest iron-ore deposits, may fall by half in the year ending March 31, 2008, from an estimated 100 million tons this year, according to the Federation of Indian Mineral Industries.

Shipments from India's eastern ports have stopped because the tax cancels the Rs 200 a tonne that exporters earn, said Siddharth Rungta, vice-chairman of the federation. Ports of Paradip, Haldia and Vizag in east India ship 19 million tonne a year, a fifth of the nation's total iron-ore exports.

Sesa Goa, India's biggest non-state iron-ore exporter, said March 1 the proposed tax will lower profit in the year to March 31, 2008, by Rs 18 crore. Sesa, 51 per cent owned by Mitsui & Co, may report a Rs 698 crore profit this year, according to a survey by Thomson Financial.