India Iron Ore Miners Forced To Revise Export Contracts-Exec

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

28 Nov 2008

Indian miners have been forced to revise iron ore export contracts for at least one million metric tons, as prices have collapsed off the highs hit earlier this year, a top industry official said. The miners, who exported 104 million metric tons of low- and medium-grade ore in the financial year to Mar. 31, 2008, are being squeezed between slowing demand and huge stocks in their biggest market, China.

"Many people have been forced to revise contracts," said Rahul Baldota, president of the Federation of Indian Mineral Industries.
Contracts covering at least one million tons of iron ore exports have been affected in the last couple of months, he said.
Conditions in China have contributed to a sharp fall in India's iron ore exports since August, and the price of medium-grade ore with 63% Fe content has plunged to $52/ton, down 64% from highs of about $145/ton earlier this year.
India's iron ore exports slumped by 50% in October to 4.2 million tons from 8.4 million a year earlier, while exports since the beginning of the financial year on Apr. 1 have dropped 12.64% from same period a year earlier to 42.1 million.
"The immediate impact of one million tons of iron ore exports (is significant given the drop in trade volumes)...For the market now, this is a fairly large quantity," said A.S. Firoz, an industry consultant specializing in steel and natural resources.
Industry analysts expect India to export around 60 million tons in 2008-09, while the federal government expects miners to export between 70 million and 80 million tons.
Plunging prices have led iron ore miners to cut production by 20%-40% in the last two months, and there are reports of some mine closures in some parts of the country, industry officials said.
"There have been some mine closures in Karnataka and some layoffs," Baldota said, without providing details.
Earlier this month, the export tax on iron ore fines was revised to 8% by value from a flat INR200/ton ($4.07/ton) to enhance competitiveness with Australia and Brazil. However, the industry had expected the tax to be scrapped.
Demand For Indian Ore Seen Improving, Price Still Low
Initial reports indicate that sentiment is improving and iron ore prices have stabilized, though they are still very low, industry officials said.
Low-grade ores with Fe content as low as 52% are selling at $10/ton free-on-board, while 58% is selling about $30/ton.
"The situation is better than what it was a month earlier," Glenn Kalavampara, secretary of the Goa Mineral Ore Exporters' Association said. "In winter, some clients are buying some ore...There has been some improvement."
"The panic is gone and there has been an improvement in sentiment," consultant Firoz said, adding that he expects long-term contract prices to fall only around 20% next year.
However, BHP Billiton's (BHP) abrupt move last week to drop its 18-month pursuit of rival mining company Rio Tinto (RIO.AU), in part because of deteriorating market conditions, was a reminder that things could get worse.
"We are apprehensive of another fall in prices," Kalavampara said, without elaborating on how much prices might drop.
Some distress sales have already taken place, one industry official said.
India benefited earlier from high shipping freight rates and its proximity to China, but with stocks piling up there and slowing demand, freight rates have crashed, taking away the Indian miners' advantage over more distant competitors.
The freight cost was critical for India, Firoz said. "India miners have no freight advantage to take home."
The Baltic dry Index, a key indicator of shipping trade, has plummeted 94% since May.
India's iron ore miners include the listed companies NMDC Ltd. (526371.BY) and Sesa Goa Ltd. (500295.BY).

Source: Dow Jones Newswires