The Finance Ministry on Monday hiked the export duty on iron ore lumps and fines to 30 per cent, effective December 30, 2011. In the 2011-12 Budget, the Government had increased the export duty on both iron ore fines and lumps to 20 per cent.
Indian iron ore exporters fear losing further ground in China, their key market, because of latest hike in export duty on iron ore. Global giants such as Vale, BHP Billiton and Rio Tinto are expected to eat into the market of Indian ore exporters, industry sources said.
India, with a share of 10-15 per cent, is a swing player in the global iron ore market which is dominated by Brazilian and Australian firms.
A blow to exporters
“Exports will drop and India will now have no say in the global market,” said Mr R. K. Sharma, Secretary-General, Federation of Indian Mineral Industries (FIMI), voicing concern over the duty hike.
The latest duty hike, the second such move in the current fiscal, has come as a blow to the exporters, who were hoping to gear up for the traditional peak export season of January-April.
Following the duty hike, shares of mining firms Sesa Goa Ltd and NMDC tanked on Monday, while that of steel firms such as JSW Steel and Tata Steel gained on the bourses.
Shares of Sesa Goa Ltd, the largest iron ore exporter, fell 4.53 per cent to close at Rs 156 on the NSE, while that of NMDC shed 3.48 per cent to end at Rs 155.30.
Among steel firms JSW Steel Ltd, which sources iron ore from the open market, gained the most at 6.9 per cent to close at Rs 542.20.
The Indian iron ore exports have already slowed in the past two years on duty hikes and rise in freight, besides being impacted by the curbs imposed by States such as Karnataka to contain illegal mining.
In the April-November period this fiscal, exports have shrunk 28 per cent to 40 million tonnes over the corresponding year-ago period.
“We might do another 5 or 10 million tonnes for the remaining part of the year. Only some exports might happen from Goa, where it is transported through the rivers,” said Mr Sharma said. In 2010-11, India exported 97.64 million tonnes, which was 17 per cent lower than the previous year.
Though the Government did not provide any rationale for the latest duty hike, exporters see the steel lobby's hand behind the move. The steel industry has been demanding a ban on iron ore exports for sometime now, in a move to conserve the raw material with huge capacity addition in the pipeline.
Losing ground in China
Indian exporters, who accounted for a fourth of the Chinese iron ore imports in 2005, have seen their share gradually decline in the past several years. In 2009, the Indian share in China stood at 17 per cent and would have come down further in past two years.
The iron ore trade was expecting some good demand from China in the near term, as buyers had planned to conclude a few deals at $130 per tonne FOB ahead of the Chinese New Year, an analyst with OreTeam said. However, with the hike in export duty the hopes for those deals are down.