Low-grade iron ore sales will continue to be badly hit if duty is not withdrawn: FIMI Secretary General

Iron ore exports have come to a virtual standstill post the duty imposition. Data from the Ministry of Commerce show 6.56 million tonnes (mt) of ore were exported in the April to July period. However, if we look at the monthly data, April saw exports of 3.05 mt and in May, it fell to 2.70 mt. But, post the imposition of duty around May-end, exports dropped to 0.31 mt in June, and to 0.50 mt in July. Numbers for August will not be very encouraging either. There’s hardly any orders except some pre-booked ones.

A June 2022 to June 2021 comparison shows a 92 per cent fall in export of iron ore. So, the fall in numbers on a month-on-month basis and a y-o-y basis is very telling of the impact.

In India, annual iron ore production was around 253 mt in FY22, with exports being around 26.32 mt. (Around 13 mt was low grade ore.) To produce 1 tonne of steel, you need 1.65 tonne of iron ore here. With crude steel production being 120 mt in FY22, the average iron ore consumption was 198-200 mt. So we are left with close to 55 mt of stock.

Now, the domestic steel industry uses high grade iron ore having Fe content of 58 per cent and more. Even pellet units here use higher grade ore because of its easy availability. The lower grade ore of iron content (Fe) 58 per cent and below that remains is monetised through exports.

There is very little use of this ore in India. The Centre is proposing beneficiation, that is upgrade of low grade ore to higher grade ones (to 62 per cent and more). But this would entail additional cost to the industry in terms of capex, and long gestation period, that include obtaining environmental clearances, land acquisition for setting up plants and so on. A 1-mt beneficiation plant roughly needs ₹1,500 crore of investment.

The other problem is, because of the absence of exports, Indian miners have to stack the low grade iron ore at the mine heads. Some 121 mt of iron ore, mostly fines, is lying unused at mineheads. The non-removal of these fines restricts the production of lumps. This will limit scientific mining operations and in turn, impact the availability of iron ore for steel mills apart from creating an environment hazard.

And, going by our estimates, the production of iron ore could be hit by around 20 per cent if exports continue to remain affected.

We do not see any solution apart from the withdrawal of export duty at the earliest. If not a complete withdrawal on all grades of iron ore, the duty on low grade ore (of 58 per cent and below) has to be modified as quickly as possible. FIMI has repeatedly reached out to the Centre representing our cause. But, so far there has been no response.

Outlook is pretty grim at the moment. The domestic demand, from steel mills, is weak and export markets remain depressed. Prices will remain under pressure, at least in the short term. We do not think prices of iron ore have bottomed out. There is scope of further fall if demand does not improve.

For the year, high grade ores (of 62 per cent and above Fe content) will continue to have buyers. But low grade ore sales have been badly hit and will continue to remain so, till the duty is not withdrawn. There are hardly any offers for it.