Exporters tap Middle East as China looks elsewhere for ore

Iron ore exporters are scouting for newer destinations as their major customer China is looking at other sourcing options due to erratic supplies from India in the last few months.

Exporters have suffered a loss of credibility and business as ore availability has dwindled following a ban on mining in
Karnataka.

What started as a distress measure to look for alternative export destinations has led to discovery of an untapped opportunity in the form of Middle East, where the demand for low-grade iron ore is gradually building up.

“The trend started sometime late last year when the debate for banning iron ore exports gathered momentum and supplies from India fell,” said Soumit Jena, managing director, Pisces Group, a Rs500 crore trader and exporter of iron ore with a substantial exposure to Goa.

Jena said with an abrupt ban on mining in Karnataka, not only did Pisces fail to meet its delivery commitments, but it also lost some of its customers in China. As a result, a search for newer markets began.

“We had our money stuck with the miners in Karnataka and had to also pay back to our lenders, which led us to Middle East where we saw a demand for low grade iron ore,” he said.

The company had last year sold 150,000 tonne of low-grade (below 52% Fe content) iron ore to Dubai, which serves as a feeder market to other Middle East areas.

“The total sale of iron ore to the Middle East was close to 300,000 tonne last year, while this year it is expected to touch 500,000 tonne,” said Prem Kumar, an advisor to Pisces and a Union commerce ministry veteran.

Kumar said since last year Indian ore exporters have seen Chinese preference shifting from India to non-conventional markets such as Malaysia, Iran, Turkey and Thailand.

He said while Middle East can help offset the loss to some extent, it is still increasing by the day as Middle East requires the low-grade ore to make cement, where the usage is much less than steel plants.

Following the Karnataka ban in July, the exports are likely to fall almost 50%, while Middle East is just opening up.  Last year, China imported close to 90% of India’s total exports and this year the numbers are expected to be way too less.

“India exported close to 90 million tonne of iron ore last year, out of which Goa accounted for more than 50%. But this year the overall figures will come down to 60% and exports from Goa will be down 45%,” said Ambar Timblo, managing director of Fometo Resources, one of Goa’s biggest miners and exporters.

Timblo said due to an unending brouhaha about mining issues in the country, exporters from Goa had been at the receiving end of the wrath of customers world over, especially China.

“Exporters are looking at newer markets to offset the loss from China, but the issue is again of establishing credibility,” he said.