By Nao Nakanishi and Alfred Cang, Reuters
HONG KONG/SHANGHAI: Chinese buyers have diverted more than 20 vessels away from India following New Dehli’s sudden and unexpected introduction of export taxes for iron ore at the start of this month.
Traders and industry officials said many of the vessels were travelling to South America to ship grain instead, though some were being loaded as scheduled, despite a call in China not to accept higher prices for contracted cargoes.
On Wednesday last week, India — the number three iron ore supplier for China after Australia and Brazil — announced it would levy an export tax of Rs300 for per tonne, effective immediately and regardless of quality.
It sent a shockwave through the industry both in China and India as Chinese were ramping up ore imports ahead of a 9.5% price hike for 2007 term cargoes effective from April.
“Major players have the power to urge shippers to keep loading. For small players, cargoes are gone,” a trader in Beijing said.
“Quite a lot of vessels have been diverted. Probably more than 20. Even we have one or two diverted.”
The China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters, held a meeting in Beijing on Tuesday to discuss how to cope with the tax increase.
The tax would raise Indian ore prices to about $95 (Rs4,227) a tonne, delivered to China — well above the prices of even Brazil currently seen at around $90.
Chamber officials declined to comment, but iron ore traders said it had recommended price rises are not accepted for a month for those cargoes contracted prior to the tax announcement.
The chamber also planned to send a delegation to India in the near future, while discussing the issue with Indian ore importers from Japan and South Korea, they said.
They said no fresh deals had been signed so far this month, with Chinese buyers reluctant to accept higher prices, while Indian sellers were not ready to shoulder the tax burden alone.
Still, the traders said many Indian sellers were shipping contracted cargoes as scheduled, while discussing how to share the additional burden with the buyers, especially for those cargoes contracted at low prices.
Asked about the domestic market, one trader in Beijing said: “It’s a problem. Chinese traders are trying to raise the prices. But the market is not accepting the higher prices right now.”