Sesa Goa,a major exporters of low-grade steel to China, could be badly hit by the curbs on iron ore imports by China.
On Thursday, China’s iron ore trading association banned its members from importing ores with less than 60% iron content, but the ban did not apply to steel mills and their licensed agents.
Officials from the Vedanta group company were not available for comment. Markets sources said Sesa Goa is yet to receive any notification.
Analysts said, “Sesa Goa exports 65-80% of its sales to China. In fact its local exposure is just 5%... the rest is exported. However, it is difficult to quantify how much it sells through traders and how much is sold directly to companies.”
China’s ban applies only to iron-ore traders and not to steel mills and their licensed agents, who can import directly.
Shares of Sesa Goa fell 4.49% to close at Rs 468.70 on the BSE. NMDC fell 1% to Rs 301.50.
Meanwhile, exporters said trades had come to a near halt as the market digested the news, but high-grade ores were expected to rise and low grades to fall. “Everybody is in panic today,” said Raja Dhupar, owner of trading firm Auro Global Comtrade in Orissa that produces mostly high grade ores. “The prices will react only by Monday or Tuesday.”
Dhupar said the benchmark ore with 63.5% iron, could rise to $180 a tonne next week from around $170 currently, with a shortage of high grade ores aiding the rise.
In 2009-10, Indian exported 106 million tonnes of iron ore out of a total production of 222 million tonnes, most of which went to China.
Most of the exporters and traders believed China’s decision may be a pressure tactic as it adjusts to a new pricing regime. Rio Tinto said on Friday it had moved to quarterly pricing of iron ore contracts dumping annual price fixing.
“The Chinese will bring all sorts of pressure on the big iron ore companies,” said R S Sharma, secretary general of the Federation of Indian Mineral Industries. But “China cannot curb import of ores of below 60%”.
(With inputs from Ruchira Singh of Reuters)
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