India Seeks Ban on Iron-Ore Shipments as Local Demand Grows, Minister Says

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31 Oct 2010

India, the world’s third-largest iron-ore exporter, should ban shipments overseas to ensure that local steelmakers have adequate supplies of the raw material, according to Steel Minister Virbhadra Singh. The country will need increased quantities of iron ore to meet domestic demand from steel producers, so there was a need for a ban, Singh said at a seminar New Delhi today. Singh had said in May India will consider banning exports “if needed.”
An end to shipments from India would increase global competition for supplies, potentially boosting prices of the raw material from Australia and Brazil, the two biggest suppliers. China is the world’s largest steelmaker, accounting for 43 percent of output last month, while BHP Billiton Ltd., Rio Tinto Group and Vale SA are the top three iron-ore suppliers.
“Limiting exports is inevitable because rapid economic development in India will demand more iron ore to feed its steel mills,” Xu Xiangchun, chief analyst at Mysteel Research Institute, said from Beijing. “China has to look for new resources, such as Africa, as alternatives to Indian ore.”
India’s Karnataka state, the country’s second-biggest producer of iron ore, banned exports in July, prompting appeals from mining companies. The state-level ban may cut India’s exports 38 percent to 66 million tons this year, according to an estimate from the Federation of Indian Mineral Industries.
India’s steel production is expected to increase to 120 million tons by 2012, Singh said in August. India’s current output is estimated at about 72 million tons.
Global Market
The global iron-ore market will likely remain “tight” in the near future because of a lack of new supply and increasing demand from China, Brazil’s Vale said this week. India “could come to contribute in a relevant way to the heating up of the iron-ore market in the medium term,” the company said.
India’s urbanization rate is 30 percent compared with China’s 47 percent, its industry is small in relative terms and the government plans to boost infrastructure spending, Vale said.
Asia’s third-largest economy will increase steel usage 10 percent in the year to March 31, compared with an April 6 forecast for a 9 percent rise, India’s Steel Ministry said on Sept. 6. Consumption climbed 9.7 percent to 24.8 million tons between April and August, from 22.6 million tons a year earlier.

Source: Bloomberg