The Hindu Business Line : Australian firms looking to export iron ore to India

Recently in Perth Australian mineral resources company such as Rio Tinto, BHP Billiton and Fortescue Metals Group (FMG) are looking at opportunities to export iron ore to India. This is despite India being a net exporter of iron ore, particularly fines, in the spot market.

“It is just a matter of time before we get a major opportunity to export iron ore to India,” said Mr Rusell Scrimshaw, Executive Director of FMG.

Intensive offtake

“India is looking at economic development where steel consumption will be intensive. We feel the steel industry in due course will have to meet demand for iron ore through imports,” said Mr Alan J. Davies, Managing Director (Global Development) and Chief Financial Officer of Rio Tinto.

“India will import iron ore in the long-term. In the next 5-10 years, the steel industry will be building capacity and India will have to look for imports. However, India currently is quizzical and we will have to see how it develops,” said Mr Ian Ashby, President and Chief Operating Officer of BHP Billiton.

All the three were expressing their views during the course of an interaction with a group of journalists on an Australian Department of Foreign Affairs and Trade-sponsored trip to Western Australia.

Stating that the level of interest in buying iron ore from Australia was “strong”, Mr Scrimshaw said Western Australia could be another source of supply. “India will soon import some quantity as its economy expands,” he said.

According to FMG, it is looking to export iron ore to the west coast in India. A few Indian steel companies had evinced “initial interest” at Australian companies as an additional source.

Ispat?

According to sources, FMG, whose first-ever shipment of iron ore reached Chinese shores on Wednesday, could be aiming to export iron ore to Ispat Industries Ltd, which operates plants in Dolvi and Kalmeshwar in Mahrashtra. Currently, Ispat gets its iron ore shipped from the East Coast and ships have to come around to Sri Lanka to deliver the ores.

Asked if the pricing would be competitive given the distance between Western Australia and ports on the west coast, Mr Scrimshaw said: “Yes, we think so. Also, we are closer to Indian west coast rather than countries such as Brazil or other South American destinations.”

The Australian firms, in particular, are looking at long-term contracts with Indian firms. It is seen as feasible since prices for such contracts are nearly 50 per cent less than spot prices, which are hovering around $220 levels.

Growth pattern

“We have looked at the Chinese growth pattern. We are also looking at the Indian pattern. It seems to exactly follow the way the Chinese have come up. There is hope that India will soon ramp up its manufacturing capability,” said Mr Davies.

“There is place for standalone steel business in India. We seen demand for iron ore coming from that,” said Mr Ashby.

Currently 40 per cent of the total iron ore exports from Australia are headed towards China.

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