Mumbai: India’s iron ore exports fell for the eighth straight month in February because of a continuing ban on shipments by its key Karnataka state and exports are likely to face further pressure as the country hikes freight rates again.
The world’s No. 3 iron ore supplier, India’s exports of the steelmaking ingredient dropped 18.6% from a year ago to 10.137 million tonnes in February, data from the Federation of Indian Mineral Industries (FIMI) showed on Wednesday.
That brought exports in April-February to 85.43 million tonnes, down 18% from a year earlier.
“Exports in March are likely to be much worse than what we saw in February,” said R.K. Sharma, secretary general of FIMI, adding Chinese buyers are waiting for global prices to ease further from February highs.
Spot iron ore prices have lost 12% since hitting record peaks near $200 a tonne in mid-February as high prices and tighter credit restrained demand from top importer China.
Tighter supply out of India had helped iron ore prices soar last month and it looks like Indian shipments will remain so as the Indian Railways said it will impose a “busy season” charge of 7% on iron ore freight rates from 1 April to 30 June and from 1 Oct. to 31 March.
“Freight charges on iron ore will go up by Rs 150-200 (per tonne),” said Dhruv Goel, managing partner with Orissa-based trader Steelmint.
India had already hiked railway freight rates by Rs 100 to Rs 1,600 per tonne from March 3.
Japan demand hopes
Higher freight rates combined with India’s plan for a four-fold increase in export taxes for iron ore fines from April 1 highlight the country’s efforts to curb exports of the raw material to feed a growing domestic steel industry.
The world’s largest fifth largest crude steel producer, India is aiming to lift output to 120 million tonnes by the end of 2012 from nearly 70 million tonnes in 2010.
Apart from Karnataka, the states of Orissa and Chhattisgarh are also seeking a ban on exports. Buyers of Indian iron ore include Sinosteel, Baoshan Iron & Steel and Nippon Steel .
India’s top court will conduct another hearing on the Karnataka ban on April 4 when a decision could be taken on whether it is allowed to continue. The ban has been in place since late July.
Iron ore exports from India are expected to fall to 90 million tonnes in the current fiscal year ending 31 March from 91.7 million tonnes a year ago, and should drop another 35% in the next fiscal year because of the higher taxes and other curbs, FIMI said earlier this month.
But FIMI’s Sharma said there could be some respite for Indian iron ore exporters on an expected revival in demand when disaster-struck Japan starts rebuilding its infrastructure.
“We hope to get some buying from Japan,” he said.
India ships over 90% of exports to China and sends about 5% to Japan.
The western state of Goa, India’s top exporting state, shipped 46.23 million tonnes in April-February, up 1.2% on year, while exports from Orissa’s Paradip port dropped 4.4% to 10.67 million tonnes, FIMI data showed.