Although the MMDR Act
will support ore output growth, the royalties included in the Act will limit the sector's overall growth potential. As part of India's 2016 Union Budget, export duty on iron ore lumps and iron ore fines with iron content below 58% were reduced to zero from 30 per cent and 10 per cent respectively.
This reduction was aimed at boosting shipments from Goa where the Supreme Court
lifted an earlier iron ore mining ban. However, the decision by India's top court to cancel all iron ore permits in Goa in February 2018 will mean that production from that state is likely to drop this year rather than increase.
As a result, we forecast India's iron ore output to grow to 241 million tonne in 2028 from 230 million in 2019. This represents an average annual growth of 2 per cent during 2019-2028 period, greater than the 0.9 per cent YoY growth witnessed between 2009-2018.
In terms of demand for ore, China
will lead the global slowdown over the long-term, although in the short-term demand will be buoyed by renewed government support to the economy on the back of the re-escalating trade war with the US.
In the long-term, China's iron ore imports will slow with the country's economic growth shifting its focus from heavy industry towards services. Chinese domestic demand for steel will slow from 2020 onwards in general as construction and infrastructure projects will decrease with the easing of government fiscal support. This will lead to an easing of steel prices
and hence production, said the report.