Iron ore exports revive on firm global prices, protectionist steps

09 January 2017

India’s iron ore mining industry seems headed for better days, with a steep price rise in world markets and protectionist measures for steel industry at home driving up production and exports.

Iron ore production jumped 22% in April-October from a year ago, aiding the government’s goal of adding the share of mining in the country’s economic output. Exports have jumped nine-fold to nine million tonnes in the April-September period, from one million tonne a year ago.

This comes in the wake of strong global demand for the commodity and protectionist steps taken in favour of domestic iron ore users—the primary steel industry—against cheap imports of steel. Iron ore price has moved up from $40 a tonne to $70 a tonne in global markets in the last few months.

The export surge is despite a 30% export duty on high grade iron ore, which accounts for only a small part of the overall iron ore exports.

Balvinder Kumar, secretary in the mines ministry, said, while mineral production volume is rising, the ministry is preparing 150-200 mineral blocks for auction in three-four months to increase exploration, aimed at raising the share of mining and quarrying in the gross domestic product (GDP) by one percentage point from 2.4% now. That goal was set by Piyush Goyal when he took charge as mines minister in July. Kumar said ore is exported from mines in Odisha, Chhattisgarh and Jharkhand.

“2017 will be a better year for the mining industry as iron ore exports have started. Secondly, we have started exploration in a big way. States such as Jharkhand, Chhattisgarh, Karnataka, Rajasthan and Madhya Pradesh will be holding auctions,” said Kumar, adding that profitable iron ore exports meant there was little need for removing the export duty applicable on high grades.

India exported 5.4 million tonnes of iron ore in all of 2015-16. It is the third-largest solid mineral produced in the country after coal and limestone.

Anjani Agarwal, mining & metals sector leader, EY, said that in 2011, the country had produced 217 million tonnes of iron ore and exported more than 100 million tonnes. The country needs about 150 million tonnes of iron ore at current production of steel, he said. Iron ore production stood at 100 million tonnes in the first seven months of this financial year, against 81 million tonnes in the same time a year ago, a 22% jump in volume. In terms of value, however, there was a 7.6% decline from a year ago.

The fortunes of iron ore mining are linked to those of the downstream steel industry.

“The government is keen to protect the domestic primary steel industry from dumping of cheaper steel as long as it takes, which is a positive factor. The long-term sustainability of steel sector will come from improved demand. It may take a while for demand for steel to go up from industries like infrastructure, construction and real estate, in the wake of demonetization. However, production volumes are going up in the automotive sector. The mood in the steel industry is of cautious optimism,” said Agarwal.

Source – Livemint