The Hindu Business Line : Iron ore exports down to a trickle

Chennai/Mumbai, Nov. 3 Iron ore exports from the country have been reduced to a trickle. Shipments from the country dropped 81 per cent in October compared with the same period a year ago on fall in demand from China and glut in the global markets.

According to Mr Glenn Kalvampara, Secretary, Goa Mineral Ore Exporters’ Association, exports slipped to 1.5 million tonnes (mt) in October from around eight mt during the same period a year ago.

“This fall is due to a combination of global economic recession, decreased international demand (a majority of which comes from China) and negative rigging in domestic markets, with the Government imposing bans and duties to curb the movement of commodities during periods of strong trade,” he told Business Line .

“Iron ore exports in November are expected to be less than one mt,” said Mr S.B.S. Chauhan, advisor to Federation of Indian Mineral Industries.

Market prices

China, the primary importer of iron ore, has ample stocks of iron ore and has stopped imports for the “time being”. “International prices have plunged to $50 a tonne f.o.b from a high of $140-150/tonne. A further fall in price is likely,” he said.

Apart from this, the Centre’s decision to replace a 15 per cent value-based duty with a flat rate of Rs 200 a tonne is likely to affect the industry. “We wrote to the Finance Ministry earlier this year, voicing our concern against such a move. Add to this the surge in railways freight charges and we can safely say that the Government has killed the golden goose (iron ore industry),” Mr Chauhan said.

Mr Kalvampara said: “The levy of this duty is especially detrimental to export of low-grade iron ore, whose prices have fallen by almost 60-65 per cent to $10/tonne.” The duty would, in principle, amount to about 40 per cent of that value, “an increase of 30-90 per cent on the previous duty exporters were paying”. According to Mr Chauhan, iron ore mining has become unviable, moreso for small players.

Closures feared

“There has been a 40-50 per cent fall in average exports so far. The next three or four months will see a downtrend in exports and prices,” he said. If the situation continues, there could be closures of mines and retrenchment of workers on a sizable scale, he added.

Mr Kalvampara said the industry was “facing very a depressed movement in exports”. “There is still hope if the Government decides to retract the flat duty, even with retrospective effect from November 1,” he said.

‘no takers’

Merchant-exporter sources said there were no takers for iron ore even at this low price couple with a lower freight charge.

For the April-October period of the current fiscal, iron ore exports are projected to have declined to 39 mt from 48 mt during the same period a year ago. During 2007-08, about 120 mt of iron ore were exported, most of them on spot to China at over $100 a tonne.

Thus, earnings through export are likely to be lower than 50 per cent of last year’s value.

Freight charges

Mr Rahul N. Baldota, Executive Director, MSPL Ltd, one of the largest iron ore exporters, said the Railways should reduce the recent hike in freight charges effected due to reclassification of iron ore consignment.

“The Railways has reclassified iron ore consignment to 200X from 120X earlier thereby doubling the earlier charges,” he said.

For instance, transportation cost of iron ore from Barajamda to Haldia dock through railways has increased to Rs 1,256 from Rs 981 a tonne, from Barbil to Paradip port to Rs 2,015 from Rs 1,568 and from Dongaposi to Visakhapatnam port from Rs 2,397 to Rs 3,086.

Barajamda, Barbil and Dongaposi are located in iron ore-rich belts of Orissa and Jharkhand.