With a drop in iron ore prices in the international market, domestic players have once again revived the demand for abolishing export duty.
“The 30 per cent export duty coupled with mining ban has led to India losing market share to Australia and Brazil in China, which would be difficult to regain,” said Tom Albanese, Chief Executive of Vedanta Resources Plc.
Price crash
Prices of 62 per cent iron ore fines (comparable to the grade mined in Goa) at Tiajin Port in China have crashed since the mining ban was imposed in December 2012. The price of the mineral in June was $92.74 a tonne, nearly half of the five-year peak of $177.45 in June 2011.
In 2012, export duty was imposed to ensure that the requirement of domestic steel manufacturers was met first. But, with prices in the international market softening, and restrictions being imposed in mining in India, many steel majors have opted for cheaper imports.
Fifty-nine per cent of the country’s iron ore reserves are located in Odisha and Jharkhand. They contain high grade ores. Chhattisgarh, Karnataka and Goa are the other major producers. Of this, Chhattisgarh’s Jagdalpur district (where NMDC has its iron ore mining operations) and Karantaka’s Bellary-Hospet region have high grade iron ore reserves and resources, while the quality of ore in Goa is of extremely low grade.
The ore demand in India is also of a much higher grade than the 62 per cent iron content ore mined from Goa. Therefore, there is a need to incentivise exports, industry players said.
Industry body Federation of Indian Minerals Industries (FIMI) estimates that India’s iron ore demand was only 96 million tonnes in 2013-14 as 45 per cent of the total crude steel production is through the induction furnace route which does not require iron ore.
FIMI’s Secretary General RK Sharma explained that this was because when India’s iron ore exports were high, Chinese plants had blast furnaces configured to take in low-grade iron ore from Goa mixed with high grade iron ore from Australia and Brazil.
“These furnaces have now been reconfigured and it would be very difficult for India to regain the market unless there is a firm policy to promote exports,” said Sharma.
Profitability of Sesa Sterlite’s iron ore mining business in Goa will also not be as high as it was before the mining ban as the production now is lower. Mining in Goa will resume with a cap of 20 million tonnes per annum.
As a result, analysts at Espirito Santo Securities and Centrum Broking expect Sesa Sterlite to be producing only 3.5 million tonnes of iron ore annually from Goa compared with 14 mtpa prior to the ban.
Source:The Hindu Business Line
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