India's iron ore exports may fall as China demand seen temporary

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

30 Dec 2008

Iron ore exports may be on the rise - thanks to a spurt in demand from China - but the slump is far from over, fear Goa’s iron ore exporters. The country’s exports to China in November rose to 8.74 million tonne (MT) as compared with 4.13 MT in October after the central government announced a slew of measures, which included a reduction in the export duty to 0% on iron ore while duty on lumps was cut by 10 percentage points to 5%. However, according to industrialists, this boom is likely to fade soon.
Many Chinese companies are busy working on their year-end balance sheets. Unlike most countries, Chinese businesses follow the calendar year and, hence, the urgency to correct accounts. “Demand has considerably picked up but I fear it’s a temporary phase, only to correct their company accounts. I think the situation will get very bad after January,” said Shrinivas Dempo, chairman, Dempo Group, one of the largest ore exporters.
In Goa, which accounts for nearly 40% of the country’s total exports, most companies are yet to resume production in spite of the growth in Chinese demand. The idea for now is to ‘do away’ with inventory and not produce more ore, say industrialists. The state is facing its worst slide ever since the mining activity was introduced in Goa under the Portuguese regime.
Iron ore exports, which stood at 30.05 MT in 2006-07 and 33.13 MT in 2007-08, plummeted to 9.5 MT in the first six months of the current fiscal. Demand picked up towards November end and early December and the state exported nearly 17 MT to China during the period.
“After the export duty was cut, we did see an increase in demand. We are now able to compete on spot prices with Australia,” S Sridhar, executive director of the Goa Mineral Ore Exporter’s Association (GMOEA), said. Ore prices earlier in the year witnessed a steep fall from an average of $130 a tonne to $40 a tonne. Currently, the rates are in the range of $55 to $70 a tonne.
According to GMOEA, nearly 40 steel units in China have shutdown. Besides, many other units are purchasing high-grade ore as against Goa’s low-grade variety to cut energy costs. Demand from Japan is also likely to drop in the next few months. The Far East country accounts for approximately nine million tonne of the state’s exports.
A decline in mining activity, which is often referred to as the back-bone of the Goan economy, is expected to affect employment levels in the state. According to a recent government survey, Goa’s 103 working mines provide direct and indirect livelihood to nearly one lakh people.

Source: Economic Times