A beleaguered Indian Government finds itself with its back to the wall where the supply of iron ore to the local steel ministry is concerned.
The fluidity of the import-export situation vis-à-vis the mining of iron ore has left it walking a tightrope.
Earlier this month, the government had affirmed its resolve in not banning, or even limiting, exports of iron ore as demanded by domestic steel majors. There was a massive shortage of ore in India following the more than 2-year long, court-imposed ban on mining, partially lifted a few months ago. Mining was not yet back to 100%, leading to a shortage in the supply of ore. What worsened the situation was that until about a couple of months ago, much of the ore mined was being exported due to better prices available internationally, leaving very little for local steel makers.
But the tables have turned now with almost no exports of ore in October and November due to the global price slump. The price of ore was already down about 50% this year, and then it touched a new low (since 2009) last week.
So now, Indian steel companies are finding it much more lucrative to import ore than buy it from local miners.
In this see-saw battle, the government did affirm that it would adopt “appropriate fiscal measures” to conserve the steel making raw material. Steel Minister Narendra Singh Tomar stated in Parliament on Monday that the crisis in the steel industry was due to inadequate supply of ore, and that many Indian steel companies were importing the crucial raw material. He said “the government is trying its best” to increase supply.
Steel companies urged the government to either ban the export of high-quality iron ore or increase the export duty from the current 30% to discourage overseas sales.
What the government, instead, has done is to direct the National Mineral Development Corporation (NMDC) to step-up production, with the ultimate aim of an annual production of 75 million tons of iron ore by 2018-19 and 100 million tons by 2020-21.
It’s also keeping its fingers crossed that when previously shut down mines in the Indian States of Odisha and Karnataka do come online, there could be some addition to the shortfall.
Import of iron ore by India has steadily increased in the last few years. This year, it was expected to end up at about 15 million tons.
As is the case inevitably, what is one man’s loss is another’s gain. In the midst of India’s battle with its iron ore supply came the news from Australia’s Pilbara Ports Authority that Port Hedland had shipped 34.4 million tons of iron ore in November.
The figure may be lower as compared to the 37.5 million tons achieved in October, but the November figure was still 23% higher than the exports in the same period last year.
Even though demand from China for iron ore was comparatively weaker, ore exports from the Western Australia port had hit the record 37.5 million tons due to a jump in shipments to India in October.
China accounted for 31.7 million mt from the port in October, the second highest volume after August’s record 32.1 million mt, according to Pilbara Ports. On the other hand, 322,000 mt of iron ore was shipped to India in the same month. It made the headlines since only small amounts were ever exported to India from here so far.
The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.