India is fast losing the Rs 1,500-crore ferro chrome export market to China due to export duty levy, which makes the mineral uncompetitive abroad markets.
Around 40 per cent of India’s total annual output of 950,000 tonnes is exported, mainly to South Korea, Japan and other Asian countries. But China, which has overtaken South Africa as the world’s largest producer of ferro chrome, has also grabbed some of India’s export share in global markets.
“The government has levied an export duty of 30 per cent on all minerals, similar to iron ore. Also, the global economic environment especially from the Euro zone, remained weak. Looking at the overall uncertainty in global economies, exports to overseas markets look to remain tough,” said Subhrakant Panda, managing director of Indian Metals and Ferro Alloys Ltd (IMFA), and president of the Paris-based International Chromium Development Association (ICDA).
By 2015, India’s overall exports of ferro chrome is expected to decline to 300,000 tonnes from 450,000 tonnes in 2010-11, he added.
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China has become the largest producer of ferro chrome, with an estimated output at 3.1 million tonnes (mt), based on imported ore from South Africa, Turkey, Oman, etc. While import and transportation costs put China at a disadvantage vis-à-vis integrated producers, the proximity to the end user may put them in an advantageous position.
The significant capacity being set up will definitely influence the industry dynamics, but China’s cost of production per se is likely to stay in the upper quartile.
Used as a raw material for producing stainless steel, ferro chrome has been facing lower demand from the domestic market as well, despite higher cost of mining. Miners have, therefore, cut ferro chrome price by 10 per cent in the last two months to encourage stainless steel producers to lift higher quantity of minerals. But stainless steel producers so far remained apprehensive over fresh booking of the minerals due to lower demand of their end products on poor infrastructure investment across the country.
Ferro chrome is currently quoted at Rs 60 a kg from Rs 65 a kg two months ago. Lower demand has squeezed producers’ margins, leading to ferro chrome producers reducing their operating capacity from 65 per cent two months ago to 50-55 per cent now, said a senior industry official.
On the global front, high carbon ferro chrome output during 2012 reached 8.95 mt with China securing the prime position by producing 3.1 mt. While the overall production has remained stagnant since 2010, there have been inter se changes with China making up for lower production in South Africa; Indian output, meanwhile, has flirted with the one-mt mark.
In addition, medium and low carbon ferro chrome production worldwide was 820,000 tonnes in 2012. Looking ahead, demand for ferro chrome is expected to be marginally higher this year in line with stainless steel production.
Around half of India’s ferro chrome output is contributed by partially integrated players, who suffered the most due to their dependence for raw material and power on others.
Fully integrated players including IMFA, which consists of around 25 per cent of the industry’s output, have, however, survived on their captive minerals and energy sources. Survival has become questionable for non-integrated players with around 25 per cent of share in the country’s overall ferro chrome output.
