Sesa Goa Ltd, the country’s largest iron ore exporter, today slumped 4.49 per cent to Rs 468.7 on the Bombay Stock Exchange (BSE), as China’s iron ore trading association banned imports with less that 60 per cent iron content. Sensex, the benchmark index of the BSE, gained 1.2 per cent at 17,933.
China imported 106 million tonnes (mt) of Indian iron ore during the last 12 months. “Exports from Goa will be impacted, as it has ore with lower iron content,” said Siddharth Rungta, president, Federation of Indian Mineral Industries. Goa contributes 45 per cent to the country’s total iron ore export.
Sesa Goa’s Managing Director, P K Mukherjee, said, “We have not got the official communication yet, so we cannot comment.”
Billionaire Anil Agarwal-controlled Sesa Goa has 65 per cent of its over 20 mt iron ore produce with less than 60 per cent iron content.
The ban by the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters covers trading firms, but not steel mills and their licensed agents.
“This could be a precursor to shutting unviable smaller units of steel production in China, who usually source from traders,” said Pankaj Pandey, an analyst with ICICI Direct, a unit of Mumbai-based brokerage ICICI Securities.
China is expected to produce 600 mt of steel this year. According to the analyst, its largest player has only 25 mt of annual capacity. The industry there is trying to consolidate. This could be an effort to cut down supply to smaller units, for whom it would be difficult to have direct tie-ups with the iron ore producers.
More From This Section
Sesa Goa mostly sells through the traders in China. “The company will have to look for a new set of buyers which may take one or two quarters’ time,” said Pandey.
“It is not alarming for the company, it may take some time but they will any how manage to sell,” said Giriraj Daga, an analyst with Mumbai-based brokerage Khandwala Securities.
The company reported net sales of Rs 3,399.5 crore for the nine months ended 31 December, 2009. Net profit stood at Rs 1,416 crore.