New Delhi/Singapore: India’s iron ore exports in September posted their sharpest monthly drop in nearly 2-year because of a ban on shipments from a key state and slower demand from China.
Exports from the world’s third-largest supplier of the steelmaking raw material declined 47% from a year earlier to 3.03 million tonnes in September, the biggest fall since October 2008, data from the Federation of Indian Mineral Industries (FIMI) showed on Wednesday. In terms of volume, it was the lowest since at least April 2007.
Reduced supplies could push up global iron ore prices and give Australia and Brazil, the two biggest exporters, the upper hand in negotiations with Chinese steel mills. India sells the bulk of its annual 100 million-tonne exports to China, the world’s top steel maker.
“If supplies are decreasing from places like India, it can only serve to underpin more robust pricing,” said James Wilson, an analyst at RBS in Perth. “If at all, it’s probably a better thing for the market.”
Tighter supplies out of India could put other producers “in a better negotiating position” in terms of contract pricing, Wilson said, even though global miners like Rio Tinto and BHP Billiton are boosting production to meet growing demand from emerging economies. Rio on Wednesday approved a $3.1 billion expansion plan to lift iron ore output in Australia’s Pilbara region by more than 28% annually from 2013 and BHP said demand from emerging economies should remain strong after reporting a 6% rise in quarterly output.
India State Ban Challenged
India’s exports for the April-September period, the first six months of the current fiscal year, fell 8.4% from the same period a year ago to 40.26 million tonnes, the data showed.
“This was expected because exports from Karnataka have totally dropped,” said Noor Ahmed, a miner and president of the Bellary-Hospet sector Iron Ore Mine Owners & Suppliers’ Association in Karnataka.
Karnataka in south India, which accounts for around a quarter of the country’s total iron ore exports, banned shipments in July to curb illegal mining and to preserve the raw material for local use.
Iron ore exporters in the state have challenged the ban in Karnataka High Court, and it is set to deliver a ruling after holding several hearings, a lawyer told Reuters.
Industry members are expecting full-year exports to drop sharply. Siddharth Rungta, president of FIMI, said last month exports in all of 2010/11 are likely to fall 25% to 30%, from 117.37 million tonnes in the year to March 2010.
The Steel Index 62% iron ore benchmark was unchanged at $152.20 a tonne, C&F to China on Tuesday, but stayed near 5-month highs touched last week, supported by tight supplies.
Goa Exports Resume
A negating factor in India’s falling iron ore export trend could be Goa state in the west where exports have reopened after the June to September monsoon.
“Exports have resumed, but they are still slow because there have been late rains this month,” said Glenn Kalvampara, secretary of the Goa Mineral Ore Exporters’ Association.
In the full year, “we can hope to touch last year’s level, but I doubt it,” he said.
Goa exported about 45 million tonnes of iron ores, mostly fines, in 2009/10, though some of it was sourced from neighbouring Karnataka.