India’s Iron Ore Export Slump: Not Necessarily a Bad Thing?

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India’s iron ore exports saw a 27.6 percent slump at 12.6 million tons (MT) during the April-February period of the current fiscal year, and much of the drop is being attributed to the export duty.

The Federation of Indian Mineral Industries (FIMI), a mineral industries body, has said India, once the third largest exporter of iron ore, had exported 17.35 MT of the mineral in the corresponding period of the last fiscal year.

FIMI Secretary General R. K. Sharma was quoted in The Hindu as saying this was a “disturbing trend” since for some years now, India has been slipping in iron ore exports because of the contentious export duty. Agencies such as FIMI have been consistently asking the Indian government to withdraw the export duty on iron ore as well as on iron ore pellets.

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Indian iron ore exports have also been hit due to mining bans in the Indian states of Goa and Karnataka, leading to a drastic fall in domestic production. The export duty had been increased to 30 percent on both types of iron ore, lumps and fines, in December 2012.

China has been the traditional export market for Indian iron ore, though the quantity has declined by 31 percent to 10.44 MT in April-February. China is followed by Japan, according to FIMI data.

With the poor response in the international markets and prices remaining weak, Goa has decided to halt the third phase of its iron ore e-auction launched last month.

FIMI has even forecast that this year’s iron ore exports would come down by over 20 percent to about 13.5-14 MT from 18.37 MT of 2012-13.

Silver Iron Ore Lining?

However, there could be a silver lining to the slump story of Indian iron ore exports. Experts here believe the country’s exports could have supplied seven years of domestic steel demand.

MetalMiner had reported on a research report by Credit Analysis and Research Limited (CARE) that had warned that India’s reserves were likely to last only 28 years if exports continued at the current rate.

Overall, India would have iron ore reserves that could last for about 38 years if exports are curtailed, according to CARE, but the continued export of fines could bring the reserve down by as much as a decade.

Iron ore mines on average produce about 35 percent of their overall production in the form of lumps (high-grade ore), while the rest is by way of fines (low-grade ore), which have fewer buyers in the Indian market.

Besides, the ore from Goa is very low-grade ore. Presently, along with this tourist state, low-grade iron ore (or fines) are being exported from states like Odisha, Jharkhand, Rajasthan and Madhya Pradesh.

In the last two months, the Goa government has already auctioned over a million tons of iron ore, mined before the ban.

Sohrab Darabshaw contributes an Indian perspective from New Delhi.

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