In the last couple of months, the price of iron ore may have come down by about 15% in India, reflecting global trends, but local steel companies remain unimpressed. In fact, some have even gone on record to claim it was a case of too little, too late.
The cheaper iron ore prices have gone down due to lower production costs of the ore, itself, and subdued demand in the domestic market. The state-run mineral producer, National Mineral Development Corporation (NMDC) had cut the price this month, too, by about $5 (Rs 300) per metric ton of lumps or higher grade iron ore and about $10 (Rs 500) per mt in fines, which contain less iron.
Too Little, Too Late
Steel companies said the price correction had come in too late and was too little to boost their margins. They said the NMDC price correction, and that by other iron ore manufacturers, had come “very late in the day,” and that it was also less than the global price correction.
Many steel companies in India have been relying on imported ore, once available at cheaper rates than Indian ore, to meet their needs. The Indian Government informed Parliament that while there was a dearth of iron ore in India, regional shortages due to the previous Supreme Court-imposed ban had led to a gap in supply and demand.
Lease renewals in the provinces of Goa and Odisha, and cancellation of mining leases in Karnataka had led to regional shortages of iron ore.
In Odisha, for example, there was a sudden spurt in ore imports this year due to a shortage of raw material locally caused by a slowdown in mining activities. Steel mills for major steel companies such as Tata Steel and Visa Steel were among the largest importers of iron ore.
The government instructed miners to increase value addition and improve iron ore availability for the domestic steel industry. Export duties on iron ore have been increased to 30%. For exports of iron ore pellets, a 5% export duty was imposed, while the government also reduced the Special Additional Duty on the import of melting scrap from 4 to 2% in the budget for 2015-16.
Export Duties A Point of Contention
As was to be expected, the export duty has become a sore point with iron ore miners. Some miners, like those in Goa, are demanding an immediate withdrawal of export duties on iron ore, as the current market conditions are making the export of low-grade ores from Goa unusable, according to a statement from the Goa Mineral Ore Exporters’ Association. Goa miners largely export the low-grade ore to China.
As reported earlier by MetalMiner, Indian steel companies have been grappling with the cheap imports problem for a long time. The imports are mainly coming from China, Japan, Korea and now, even Russia, where demand for the ore has plummeted recently.