India could become net importer of iron ore next year

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Commodities, Imports

Talk about an own goal.

India, the fourth-largest iron ore producer in the world, could become a net importer next year, Cogencis reported recently.

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In the April-September period this year, India imported 900,000 tons of iron ore and exported 17.18 million tons partly, due to an oversupply in the domestic market. However, even in 2018, India imported 12.8 million tons of the ore and exported 16.19 million tons, according to the article — a net export of over 3 million tons.

This spectacular own goal has come about because the tenure of 329 non-captive mining leases, including 24 working iron ore mines, is set to expire in March, which contributed roughly 30% to last year’s iron ore output of 210 million tons.

Though the mines would be up for auction from April, the article states, industry officials believe it could take at least 3-4 years for these mines to be operational again because of the time required for new environmental and planning consents.

In and of itself, India’s switch from exporter to importer isn’t going to move the global markets much.

But for a country struggling with its balance of payments, it is an unwelcome burden. For Indian steel producers, the need to import more will raise domestic iron ore prices and, as such, steel input costs for domestic steel mills.

The country generally imports higher-grade iron ore above 60% iron content and exports lower grade below 58% iron content to China, so it will be paying top dollar for Australian or Brazilian premium grade iron ore.

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Estimates put domestic iron ore prices on track for a 15-20% cost increase next year. As a result, this will reduce Indian mills’ competitiveness on export markets at a time when Chinese steel mills are looking for more export sales if domestic demand weakens there as expected.

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