Iron ore exports to see decline in near term over Covid-19 concerns

Topics Coronavirus | Lockdown

The last fiscal witnessed iron ore exports record a phenomenal rise of 136 per cent to 30.2 million tonnes Photo: Bloomberg
After witnessing a whopping year-on-year growth of 136 per cent during April-January of FY20, the country’s iron ore exports are projected to decline as the Covid-19 induced lockdown takes a toll on port operations and availability of labour.

“There is hardly any significant production from merchant mines now. We are not getting ample workforce or trucks to move even the accumulated ore. Export orders have evaporated after the outbreak and spread of the virulent Coronavirus disease. Iron ore exports are bound to decelerate in this fiscal as we don’t see any quick recovery in sight," said a leading standalone miner in Odisha.

Iron ore exports from the country have suffered a jolt owing to ramped down port operations, logistics issues and glaring labour shortage. Demand contraction in importing countries has also hurt export consignments.

“China has started accepting some iron ore consignments from India as their steel mills have restarted. But we have been unable to keep pace even with depleted demand as miners continue to wrestle with the lack of trucks and labour," said an Odisha-based exporter.

The last fiscal witnessed iron ore exports record a phenomenal rise of 136 per cent to 30.2 million tonnes (January end).

“Supply shortage of iron ore in the global market led by outages at Vale in Brazil and cyclone in Australia bolstered demand for Indian iron ore during the year. Besides, falling steel prices could also have prompted companies to purchase lower grade iron ore fines from India to keep their cost under control and preserve margins. India could export more due to increased domestic supply and competitive prices. India’s production of iron ore was higher in FY20 as miners ramped up outputs to optimal levels during the last year of operations of their mines which have now been auctioned”, an iron ore update report by CARE Ratings noted.

Usually, India exports baser grade iron ore with iron content less than 58 per cent as this category is exempted from duty. An export duty of 30 per cent is imposed on ore with richer content. Exports of iron ore from the country have been falling steeply over the past two years after the government levied the steep export tax.

“Though China has been the largest buyer of India iron ore (with a share of 70-75 per cent) exports to China had declined by 35 per cent each in FY18 and FY19. However, in the financial year 2019-20, exports to China shot up 170 per cent to 25.7 million tonnes during April-January FY20 against the corresponding period last year”, the report by CARE Ratings noted.

China mainly purchases its higher grade iron ore from Vale in Brazil and Australia. The country increased its purchases from India following lower supply from the two countries. China had a share of 85 per cent in total iron ore exports from India followed by Japan with a share of 5.3 per cent and South Korea with a share of 3.1 per cent.

In calendar year 2019, India filled in the supply gap created by two of the largest iron ore producing countries in the world, Brazil and Australia. In January 2019, world’s largest iron ore producer Vale SA was forced to suspend operations at several of its iron ore mines following a dam burst, which claimed the lives of more than 270 people. This led to a severe supply shortage of iron ore globally. Several mines with mining capacity of almost 40 million tonnes were shut. Vale’s production of iron ore fines stood at 302 million tonnes in 2019, 21.5 per cent lower than in 2018, while pellets production was 41.8 million tonnes in 2019, 24.4 per cent lower than in 2018. The supply crisis was aggravated by the tropical cyclone in Australia, which disrupted mining operations and iron ore supplies.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel