India's Iron Ore, Coal Imports From South Africa: A Shaky Prop

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It’s no secret that India’s steel manufacturers have been importing iron ore for almost a year now to fuel their plants.

What was not known, at least officially, was that a large bulk of that raw material was supplied by South Africa.

Recently, local media outlets ran reports quoting unnamed government officials as saying that this year, South Africa was emerging as a key supplier of coal and iron ore to India.

Based on the import figures of the current financial year, Indian government officials figure that India’s coal imports from South Africa could well end up at about 20 million of the total 100 million tons coal imports expected by the end of March.

But this relationship built on significant trade volume may be in danger.

The Indian government figures that by the end of the financial year, almost 50 million tons of iron ore for India’s steel requirements would have been imported to meet the annual projected demand of 160 million tons. Nearly half of this imported ore will be from South Africa, it predicts.

Iron ore mining in India had practically come to a standstill because of a legal ban in the wake of the unearthing of a major illegal mining scam. Even as a percentage of the ban has been lifted, stringent conditions have been placed on operations in two key mining states, Karnataka and Goa. All this will clearly be reflected in this financial year’s production figures.

Goa, for example, banned all production last month to curb illegal mining, and shipments from here — the world’s fourth-largest supplier — are expected to drop 36 percent this year.

current steel prices - MetalMiner IndXReports said between April and September this year, private steel mills in India were forced to import 600,000 tons of ore. They sourced nearly half of this from South African mines. A major Indian steel producer, Essar Steel, sources its raw material from the Kumba Iron Ore Ltd (KIO), for example.

South Africa has been on India’s list of top 5 coal import nations along with Indonesia and Australia. This year, by the Indian government’s reckoning, South Africa seems to have gotten even greater preference because of the latter’s liberal trading regime and competitive export prices.

But the South Africa-India story may not necessarily end on a happy note, as predicted in certain government circles here. The bonhomie may be adversely affected because of the on-going workers’ strike in the South African mining industry.

The strikes that began in the platinum mines in August this year soon spread to gold, chrome, and then coal and iron ore mines. The walkouts have already reduced South Africa’s mining production by 10.1 billion rand (US $1.16 billion) this year, according to a report released by that nation’s National Treasury, while presenting its mid-term budget.

The importance of coal and iron for South Africa’s growth can be realized from the fact that taken together, the total value of that nation’s exports of coal and iron ore amounts to slightly more than the value of its annual gold exports.

KIO itself has been caught up in the agitation.

Continued in Part Two.

Sohrab Darabshaw contributes an Indian perspective to MetalMiner. 

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