Firm Iron Ore Prices Raise Hopes Of Export Revival

The rise of international iron ore prices to over $105 per ton, the highest in five years, has kindled hopes of revival in exports of lower grade iron ore from India, industry sources said.

Exports of iron ore of up to 58 percent attract zero duty. Once the prices of this baser grade of iron ore breaches $70, exports become a viable option. Odisha alone has in excess of 100 million tons of inferior grade iron ore accumulated at the mine heads. Since the ore is not absorbed in the domestic market, exports seem the only outlet. Besides, Odisha, Jharkhand also have inventories of lower grade iron ore. Together, Odisha and Jharkhand account for over 80 percent of the country’s accumulated iron ore stockpile, sources said.

Despite the ‘zero duty’ incentive, exports of lower grade material did not gain traction because of flagging demand in international markets, especially China. China’s steel mills had shown more proclivity to buy enriched iron ore and even pellets as the local and national governments there launched a crackdown on polluting industries to meet emission norms.

However, supply disruptions in Brazil and Australia and plunging inventories at China’s ports goaded the steel makers to source more iron ore, reviving demand for Indian exporters. Prices of lower grade ore have touched $85, spelling lucrative business for domestic miners. Higher grade iron ore (65 percent Fe) prices zoomed to $119, while futures of benchmark 62 Fe grade iron ore soared to $105 at China’s Dalian commodity exchange.

In FY2019, India turned a net importer of iron ore as imports outweighed exports. The country’s iron ore imports saw a spike of 43 percent to 12.3 million tons (mt) as steel makers preferred to source higher grade ore from overseas and the spread between imported and domestic iron ore prices closed in. However, iron ore exports from the country tanked 56 percent to 6.9 mt owing to mining ban clamped in Goa by the Supreme Court, depressed seaborne prices and steep 30 percent export duty (on higher grade ore) contained exports.