Iron ore exports to China picking up slowly

Chinese demand for Indian iron ore is picking up slowly over the past few weeks and miners are expecting that the removal of export duty on iron ore by the Centre on Sunday will have a visible impact in the growth of exports over the next seven to 10 days.

The Government on Sunday removed export duty completely for iron ore fines and reduced the rate from eight per cent ad valorem on iron ore lumps to five per cent.

Bookings from China are expected to go up in the coming weeks as Chinese buyers are trying to defer their contracted supplies from Brazil and Australian companies because of the lower price offered by Indian companies, mining industry sources said.

"The availability of railway rakes for movements to the ports has also improved in recent weeks and exports are picking up from the ports of Chennai, Murmugao and Paradip," mining company officials said.

According to the Secretary General of the Federation of Indian Mineral Industries (FIMI), Mr R.K. Sharma, China is picking up more Indian iron ore now and the removal of iron ore export tax will give big boost to the exporters.

"The impact of the tax reduction will be felt in the next seven to ten days," he said.

Higher price contracts

Chinese companies had entered into long-term contracts with mining companies in Brazil and Australia at very high prices. Since these are fixed quantity price contracts Chinese buyers will have to lift the entire quantity mentioned in the contract. Chinese companies are trying to delay the lifting from these two countries replacing them with Indian ores, industry sources said.

Brazilian companies have raised their contract prices for ores having 63.5 per cent iron content by 65 per cent for fines and by 71 per cent for lumps over last year's prices. Similarly, Australian companies have negotiated 79.88 per cent higher price for fines and 96.5 per cent for lumps, he pointed out.

"These prices are 30-40 per cent higher compared to the price of $50-$60 a tonne at which they are buying from us," Mr Sharma said. This is bringing down the average cost of iron ore for the Chinese steel manufacturers.

Iron ore exporters are expecting Chinese demand to pick up further in the coming months as the country would try to bridge the gap between its total iron ore demand and the combined supply from Brazil and Australia taken together through spot market buys from India.

information from www.thehindubusinessline.com