Export of iron ore lumps may drop 50% on duty hike .

New Delhi, May 2 The recent duty hike on iron ore lumps will accelerate the downward trend in exports of the commodity, which has seen a steady decline in the past four years.

The Government on Thursday increased the export duty on iron ore lumps to 15 per cent from 10 per cent to discourage exports and improve raw material availability for local steel mills.

“The duty increase will have a major impact on exports of lumps. We expect the exports to halve this year to 5-6 million tonnes,” said Mr R.K. Sharma, Secretary General of the Federation of Indian Mineral Industries.

According to provisional numbers, India's iron ore lump exports was around 11 million tonnes in 2009-10 and have declined by 28 per cent in the past four years from a peak of 15.3 million tonnes in 2006-07.

FIMI expects the overall iron ore exports to decline by around 5 per cent in the current financial year. Indian iron ore exports peaked at 106 million tonnes in 2009-10 from 78.14 million tonnes in 2004-05, primarily driven by the demand from China.

“We may not cross 100 million tonnes this year,” Mr Sharma said, adding that India is a residual supplier mainly addressing the shortfall in the Chinese demand and supply gap of Brazil and Australia. China, the world's largest consumer, imported 628 million tonnes in 2009.

The iron ore lumps are largely consumed by the Indian steel units, mainly the sponge iron manufacturers. “The lumps are not in demand worldwide and accounted for about a tenth of total Indian exports,” Mr Sharma said.

Indian lumps are mainly imported by China, Japan and South Korea.

“There is a decline in Chinese demand because of the holidays. This is expected to bring down the prices by 30-35 per cent,” said Mr Ranjan Chhibba, Vice-President of Chinese iron ore importing firm Red Horse Resources HK Ltd.

Chinese ban

The export duty hike will make the export of low-grade lumps with an iron content of 51-58 per cent unviable, Mr Chibba said. Besides, the Chinese ban on low-grade ore imports would also hit the Indian exports, he said.

Thursday's export duty hike is the second instance in less than six months. Earlier, the Government had increased export duty on lumps in December from 5 to 10 per cent, when it had also slapped a 5 per cent duty on fines.

Source : Business Line