Welcome move by Steel Ministry
The government at last has woke up to the need for conserving national resources. When the major iron ore producers in the world had been restricting export of ore, India’s merchant miners had been busy sending quality ore to China. The greed of instant profit saw India frittering away a major competitive advantage to its major competition.
How important is export of ore for the merchant miners can be illustrated by the fact that India produces more than 200 million tonnes of iron ore annually and exports about half of that. The largest mining firm is state-run NMDC, which produces about 29 million tonnes annually, mostly for local sales. Apart from the steel manufacturers like SAIL, Tata Steel which have captive mines a majority of the 250 operational mines in the country export the precious ore for value addition elsewhere outside the country.
China is India’s biggest buyer, with its proximity helping it secure ores with low freight costs. The largest exporter is Sesa Goa, a unit of London-listed Vedanta Resources. It exported 14 million tonnes in the 2008/09 fiscal year (April/March). Other large producers and exporters are Essel Mining, Rungta Mines, VM Salgaocar, MSPL and Chowgule. Miners in Goa, (Sesa is one) on the west coast, have lower costs as mines are located near the port, and so avoid road and rail charges.
Now that the government has realised the loss to the nation due to such wanton export it has imposed higher duty on export of ore. At December end, export duty on iron ore lumps was raised to 10 per cent from 5 per cent and on fines a 5 per cent duty was imposed. But with cost of mining iron ore ranging from a low US$8 to $16 per tonne, the token duty does not help. Hence, now the Steel Ministry has made a case for 20 per cent export duty on high-grade ore.
In its set of pre-Budget proposals for the Finance Ministry, the Steel Ministry pointed out that export of the mineral has surged in the first seven months of 2009-10 by more than 20 per cent in comparison to the same period last year and “such an increase in iron ore export was witnessed at a time when the country’s overall exports were showing negative growth.”
Citing that the exports have spiraled up on account of global demand, particularly from China, the spot prices of iron ore fines (63.5 Fe) have risen to $90-95 FOB currently and “therefore there is an urgent need to heavily disincentivise export of iron ore not only to conserve it for the long-term requirement of the domestic steel industry but also to curb its illegal mining.” The profit from selling iron ore abroad thus works out to huge, since the cost of mining the same is mere US$ 8-16 per tonne.
“To prevent unabashed export of iron ore out of the country and to conserve it for long-term value addition by the domestic steel industry, an export duty of 20 per cent may be levied on export of all varieties of iron ore,” the ministry said in its recommendation.
The Chinese steel industry’s demand for Indian iron ore has witnessed considerable increase in the recent months. Our iron ore export during October 2009 was around 10 million tonnes as compared to around 5 million tonnes during October 2008, an increase of more than 100 per cent. Overall during the firsts eight months of the fiscal 2009-10 (April-October) period exports were higher by more than 20 per cent. The proposal will ensure adequate domestic ore for Indian steel manufacturers.
The steel manufacturers have welcomed the move. India needs to curb the export of its iron ore reserves which are required in huge quantity to meet the projected steel production in the country. Increasing exports of iron ore is a disturbing trend. Exports should be banned. We don’t need to export something which God has given to us,” Amit Chatterjee, advisor to Managing Director of Tata Steel Ltd, told media recently.
“Restrict export of higher grade iron ore. Lower grade is a different issue,” he said in the Global Steel Conference. Foreseeing a great future for the domestic steel industry, Chatterjee said, “India will have a greater usage of steel in general.” Chatterjee predicted that there would be increased usage of steel in construction and boom in automobile industry would further add to the demand. India has the advantages of low cost iron ore and lower labour cost, which present domestic market with a vast growth potential. India's steel manufacturing capacity would touch 100 MT by 2012.
Welcoming the Steel Ministry move Anil Surekha, director finance of Ispat Industries said, “This is a good suggestion made by the steel ministry as higher duty will help in preserving ore for value addition within the country and increase its availability at cheaper prices for steel makers. At a time when steel capacity in the country is proposed to be increased manifolds, large scale exports of the raw material is not justified.”
The duty on pellets, lumps and fines was raised only recently December 2009 following consistent rise in ore exports. Prior to December, the duty on iron ore fine was nil and on pellets and lumps was 5 per cent. Iron ore imports, on the other hand, attracts a duty of 2 per cent. The Steel Ministry has recommended that this should be brought to zero to facilitate coastal steel plants who use high grade iron ore for blending. The Ministry had at times even argued for a ban on iron ore exports to conserve raw material for the industry. The Steel Ministry also wants the customs duty on stainless steel and alloy steel melting scrap to be brought down from 5 per cent to zero, to further boost the availability of raw material for the industry.
By Sugato Hazra
The government at last has woke up to the need for conserving national resources. When the major iron ore producers in the world had been restricting export of ore, India’s merchant miners had been busy sending quality ore to China. The greed of instant profit saw India frittering away a major competitive advantage to its major competition.
How important is export of ore for the merchant miners can be illustrated by the fact that India produces more than 200 million tonnes of iron ore annually and exports about half of that. The largest mining firm is state-run NMDC, which produces about 29 million tonnes annually, mostly for local sales. Apart from the steel manufacturers like SAIL, Tata Steel which have captive mines a majority of the 250 operational mines in the country export the precious ore for value addition elsewhere outside the country.
China is India’s biggest buyer, with its proximity helping it secure ores with low freight costs. The largest exporter is Sesa Goa, a unit of London-listed Vedanta Resources. It exported 14 million tonnes in the 2008/09 fiscal year (April/March). Other large producers and exporters are Essel Mining, Rungta Mines, VM Salgaocar, MSPL and Chowgule. Miners in Goa, (Sesa is one) on the west coast, have lower costs as mines are located near the port, and so avoid road and rail charges.
Now that the government has realised the loss to the nation due to such wanton export it has imposed higher duty on export of ore. At December end, export duty on iron ore lumps was raised to 10 per cent from 5 per cent and on fines a 5 per cent duty was imposed. But with cost of mining iron ore ranging from a low US$8 to $16 per tonne, the token duty does not help. Hence, now the Steel Ministry has made a case for 20 per cent export duty on high-grade ore.
In its set of pre-Budget proposals for the Finance Ministry, the Steel Ministry pointed out that export of the mineral has surged in the first seven months of 2009-10 by more than 20 per cent in comparison to the same period last year and “such an increase in iron ore export was witnessed at a time when the country’s overall exports were showing negative growth.”
Citing that the exports have spiraled up on account of global demand, particularly from China, the spot prices of iron ore fines (63.5 Fe) have risen to $90-95 FOB currently and “therefore there is an urgent need to heavily disincentivise export of iron ore not only to conserve it for the long-term requirement of the domestic steel industry but also to curb its illegal mining.” The profit from selling iron ore abroad thus works out to huge, since the cost of mining the same is mere US$ 8-16 per tonne.
“To prevent unabashed export of iron ore out of the country and to conserve it for long-term value addition by the domestic steel industry, an export duty of 20 per cent may be levied on export of all varieties of iron ore,” the ministry said in its recommendation.
The Chinese steel industry’s demand for Indian iron ore has witnessed considerable increase in the recent months. Our iron ore export during October 2009 was around 10 million tonnes as compared to around 5 million tonnes during October 2008, an increase of more than 100 per cent. Overall during the firsts eight months of the fiscal 2009-10 (April-October) period exports were higher by more than 20 per cent. The proposal will ensure adequate domestic ore for Indian steel manufacturers.
The steel manufacturers have welcomed the move. India needs to curb the export of its iron ore reserves which are required in huge quantity to meet the projected steel production in the country. Increasing exports of iron ore is a disturbing trend. Exports should be banned. We don’t need to export something which God has given to us,” Amit Chatterjee, advisor to Managing Director of Tata Steel Ltd, told media recently.
“Restrict export of higher grade iron ore. Lower grade is a different issue,” he said in the Global Steel Conference. Foreseeing a great future for the domestic steel industry, Chatterjee said, “India will have a greater usage of steel in general.” Chatterjee predicted that there would be increased usage of steel in construction and boom in automobile industry would further add to the demand. India has the advantages of low cost iron ore and lower labour cost, which present domestic market with a vast growth potential. India's steel manufacturing capacity would touch 100 MT by 2012.
Welcoming the Steel Ministry move Anil Surekha, director finance of Ispat Industries said, “This is a good suggestion made by the steel ministry as higher duty will help in preserving ore for value addition within the country and increase its availability at cheaper prices for steel makers. At a time when steel capacity in the country is proposed to be increased manifolds, large scale exports of the raw material is not justified.”
The duty on pellets, lumps and fines was raised only recently December 2009 following consistent rise in ore exports. Prior to December, the duty on iron ore fine was nil and on pellets and lumps was 5 per cent. Iron ore imports, on the other hand, attracts a duty of 2 per cent. The Steel Ministry has recommended that this should be brought to zero to facilitate coastal steel plants who use high grade iron ore for blending. The Ministry had at times even argued for a ban on iron ore exports to conserve raw material for the industry. The Steel Ministry also wants the customs duty on stainless steel and alloy steel melting scrap to be brought down from 5 per cent to zero, to further boost the availability of raw material for the industry.
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