India Ministry Wants Ban on Iron Ore Exports .

NEW DELHI -- India's steel ministry is seeking a complete ban on exports of iron ore to preserve the raw material for its expanding domestic steel industry, Steel Minister Virbhadra Singh said Friday.

"The current export tax is insufficient. If possible, the government should completely ban iron ore exports or at least impose a uniform 20% tax on its exports," Mr. Singh told Dow Jones Newswires.

The steel ministry recently wrote to the finance ministry proposing a rise in the export tax on iron ore, Singh said. The government currently charges a 5% export tax on powdery iron ore fines and 15% on iron ore lumps.

India, the world's third-largest iron ore exporter, shipped about 106 million tons--of a total production of 226 million tons--in the fiscal ended March 31, 2010. About 90% of its exports were to China.

Domestic miners say most Indian steel companies lack the technology to utilize fines to make steel, so they export the raw material. However, the minister said steel companies are beginning to use new technologies to utilize fines.

"It is better to export the finished product, rather than the raw material," he said.

India's steel demand in the financial year ended March 31, 2010 rose 7.6% to 56.32 million tons, helped by demand from the automobile, roads and housing sectors. The minister said demand for steel is expected to grow by at least 10% this financial year.

India, the world's fifth-largest steel producer, plans to raise its steel production capacity to 124 million metric tons by December 2012 from 72 million tons currently.

Singh said the target was achievable, unless there were some unexpected delays in acquiring land for projects.

Domestic steel producers, such as Steel Authority of India, Tata Steel and Essar Steel, are expanding their production capacities to meet the growing demand for steel.

Additionally, global steelmakers such as South Korea's POSCO and the world's leading steel company, ArcelorMittal, have lined up investment plans in India, but their capacities are not included in the government's production capacity target of 124 million tons.

Some greenfield projects have made slow progress due to delays in the granting of iron ore mines and land.

"There were initial difficulties in land acquisitions, but things have started progressing," the minister said.

Separately, he said a rise in steel imports over the past few months was not a matter of concern, as long as it didn't hurt local manufacturers.

"The government will step in if overseas steel producers start dumping their products in India below their production cost," Mr. Singh said.

India's April-May steel imports rose 79% from a year earlier to 1.79 million tons, according to steel ministry data.

State-run Steel Authority, the country's largest steelmaker by volume, is keen to collaborate with South Korean steel producer POSCO and Japanese steel company KOBE to set up new plants in the country, Singh said.

"India doesn't produce special grade steel. We will like to tie-up with foreign companies for locally manufacturing such grades, which are in great demand," he said.

Steel Authority and POSCO are in talks to set up a 1.5 million ton per annum steel plant in India's eastern town of Bokaro. The two companies are working out details of the proposed joint venture in which POSCO will likely have a majority stake.

An Indian delegation comprising officials from the steel ministry and Steel Authority visited KOBE's steel plant in May to explore technology tie-ups.


Source : Online Wsj