Iron ore exports fall for 8th month

Iron ore exports fell for the eighth straight month in February owing to a continuing ban on shipments by its key Karnataka and exports are likely to face further pressure as the country hikes freight rates again.

The world’s No. 3 iron ore supplier, exports of the steelmaking ingredient dropped 18.6% from a year ago to 10.137 million tonne in February, data from the Federation of Indian Mineral Industries (FIMI) showed on Wednesday.

That brought exports in April-February to 85.43 million tonne, down 18% from a year earlier.

“Exports in March are likely to be much worse than what we saw in February,” said R K Sharma, secretary general of FIMI, adding Chinese buyers are waiting for global prices to ease further from February highs.

Spot iron ore prices have lost 12% since hitting record peaks near $200 a tonne in mid-February as high prices and tighter credit restrained demand from top importer China.

Tighter supply out of India had helped iron ore prices soar last month and it looks like Indian shipments will remain so as the Railways said it will impose a “busy season” charge of 7% on iron ore freight rates from April 1 to June 30 and from October 1 to March 31.

“Freight charges on iron ore will go up by `150-200 (per tonne),” said Dhruv Goel, managing partner with Orissa-based trader Steelmint.

The government had already hiked railway freight rates by Rs100 to Rs1,600 per tonne from March 3.

Higher freight rates combined with the government’s plan for a four-fold increase in export taxes for iron ore fines from April 1 highlight the country’s efforts to curb exports of the raw material to feed a growing domestic steel industry.

The world’s largest fifth largest crude steel producer, the government is aiming to lift output to 120 million tonne by the end of 2012 from nearly 70 million tonne in 2010.

Apart from Karnataka, the states of Orissa and Chhattisgarh are also seeking a ban on exports. Buyers of Indian iron ore include Sinosteel, Baoshan Iron & Steel and Nippon Steel.

The top court will conduct another hearing on the Karnataka ban on April 4 when a decision could be taken on whether it is allowed to continue. The ban has been in place since late July.
Iron ore exports from the country are expected to fall to 90 million tonne in the current fiscal year ending March 31 from 91.7 million tonne a year ago, and should drop another 35% in the next fiscal year because of the higher taxes and other curbs, FIMI said earlier this month.

But FIMI’s Sharma said there could be some respite for Indian iron ore exporters on an expected revival in demand when disaster-struck Japan starts rebuilding its infrastructure.

“We hope to get some buying from Japan,” he said.

The government ships over 90% of exports to China and sends about 5% to Japan.

Goa, India’s top exporting state, shipped 46.23 million tonne in April-February, up 1.2% on year, while exports from Orissa’s Paradip port dropped 4.4% to 10.67 million tonne, FIMI data showed.