The Hindu Business Line : ‘China impact on iron ore sector could stabilise industry’

With the Chinese market trend posing a serious question about the sustainability of mining exports, many operators could go out of business, leaving only the serious players in the field.

Our Bureau

Bangalore, Oct. 9 Declining iron ore demand in China and the 15 per cent export duty could be a blessing in disguise for the exporters, especially those in Goa, who are battling challenges from environment activists.

Industry sources feel that the “China impact” could lead to some introspection in the industry. According to the Federation of Indian Mineral Industries, the downward trend started about two months ago with rising exports of cheaper ore from Australia and a higher Indian export tax, raising questions about India’s competitiveness to stay in the market.

India exported about 93 million tonnes of iron ore in the fiscal year ending March 2007, out of which about 75 per cent went to China.

Mr Rahul Baldota, President of FIMI, said exports to China could halve in the financial year ending March 2009 if the current situation continue.

Traditionally, Goa had been exporting iron ore to Japan, Taiwan and South Korea. With China joining the fray in 1988 and its demand peaking in 2000, with phenomenal price escalation, exporters resorted to selling ore to China at spot price. The phase after 2000 also saw many exporters breaking long-term contract, said an industry source.

Long-term contract accounted for only 45 per cent of the overall iron exported from Goa. The State exported 33 million tonnes of iron ore last year.

Unhealthy Competition

Mr S. Sridhar, Executive Director of Goa Mineral Ore Exporters’ Association, told this correspondent recently in Goa that the sliding ore exports to China should restore sanity in the industry, which has witnessed intense competition from new players.

The late entrants have been resorting to unscientific practices, which attracted protests from activists opposing mining, he said.

He said despite following environment and safety norms, selective targeting of big companies by activists impeded the growth of the industry. He said “agitationists have no serious intent except to create unnecessary problems”.

Filtering process

Mr Sridhar said with the Chinese market trend posing a serious question about the sustainability of mining exports, many operators could go out of business, leaving only the serious players in the field.

“This will bring us back to the position that was prevalent pre-China period”, when stable pricing and sustainable mining practices were the norm.

The peak period for exports to China was over, Mr Sridhar said, adding that there was a likelihood of long-term contract becoming the norm even with China.

Japan has been a traditional market buying on long-term contract from the State, instilling some stability in the price, acting as a discipline against exploitation of resources.

Also, the dwindling exports, having its own impact on employment, will help in gaining the support of the local communities, which could in turn discourage protestors from exploiting the communities against the mining industry, Mr Sridhar said.

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