Odisha mines are a major beneficiary of the Chinese import boom, though they accounted for a sliver of China’s imports of 659.6 million tonnes in the first seven months of calendar 2020 that marked an 11.8 per cent rise over the same period last year.
“Understandably, there is some satisfaction in the industry at our first-half exports to China being only next to the 27.8 million tonnes clocked in the corresponding period of 2012,” said an Odisha-based iron ore producer-exporter. “But what we are doing now, thanks to Chinese hunger for ore, stands in no comparison to our exports of 127 million tonnes in 2011-12 on a production of 227 million tonnes. Then, too, China was by far the largest export destination,” he added.
China accounts for 54 per cent share of world steel production. In the face of limited domestic iron ore supplies, China needs to import over 1 billion tonnes annually, amounting to nearly three-quarters of global seaborne trade in the commodity. Surprising the world and confirming that Beijing’s stimulus programme is yielding results, China’s steel production in the first seven months of 2020 was up 2.8 per cent to 593.174 million tonnes, while global output was down 5.3 per cent to 1.028 billion tonnes.
At one point, New Delhi embraced the concept of preserving natural resources for local value addition and put an export-smothering duty of 30 per cent on all iron ore varieties. Since then, however, the government sought to correct the anomaly by removing the duty on fines and lumps with iron (fe) content of up to 58 per cent but kept it at 30 per cent on higher grades of ore. That has not helped much. Last calendar year, India exported just 32.1 million tonnes out of a production of 231 million tonnes. China alone bought 19.08 million tonnes, including 13.01 million tonnes of pellets, which do not invite export duty.
India is richly endowed with iron ore resources of around 32 billion tonnes (more will be added to that with further exploration), so it is well placed to meet the growing requirements of local steelmakers while becoming an exporter of global significance, next only to Australia and Brazil, according to FIMI Secretary General R K Sharma. Trade officials, however, said that till such time as the 88 Goa iron ore mines
that were decommissioned in mid-March 2018 on a Supreme Court order return to production, India’s exports would not match the 2011-12 level. That year, of Goa’s exports of 38 mt, China alone was the destination for 34 mt. Sharma said:“Goan ore with low fe content has practically no use for steelmakers here. China traditionally provided a major outlet for that ore.” Incidentally, almost the entire production in the country’s smallest state with reserves of around 1 billion tonnes buried at its hills was always exported.
The closure of mines, which in normal times accounted for 25 per cent of the Goan economy, and stalling tourist traffic as a result of the pandemic have wreaked havoc with the state’s finances. Ambar Timblo, managing director of Fomento Resources and president of Goa Mineral Ore Exporters Association, said: “The mining ban has had a far-reaching and deeply disturbing socio-economic impact.” Besides the exchequer losing around Rs 7,000 crore in revenue, the closures impact about 100,000 direct jobs plus 300,000 in supporting services such as transportation.
Now, Goa Chief Minister Pramod Sawant has enlisted New Delhi’s support to explore ways to reopen the iron ore mines.
In a parallel move, Vedanta, which became the state’s largest miner by acquiring Sesa Goa from Mitsui & Co of Japan and subsequently buying the mining and maritime businesses of the Dempo group, has moved the Supreme Court to restart operations for its 10 leases. Trade officials said New Delhi should, meanwhile, allow duty free exports of iron ore containing fe of at least up to 62 per cent to improve the competitiveness of the Indian mineral in world markets. After all, local producers of sponge iron, pig iron and pellets will use only high grades of ore. Growing Chinese demand has sent iron ore prices
to six-and-a-half year highs. Why shouldn’t our exporters be enabled to cash in on this bull run?