Weak Goa exports, suspension of Odisha mines fail to dent iron ore trade

Jan-Mar quarter crucial as Odisha poses threat of lower contribution to FY18 iron ore trade

Despite a sharp fall in Goa's iron ore exports, India's largest iron ore exporting state, the country's total iron ore (including pellets) trade volumes during April-December 2017 have moved up 1.36 per cent on year-on-year basis.

As per the Indian Port Association (IPA) data, India's total iron ore trade volumes during the nine-month period stood at 33.46 million tonne up from 33.01 million in the corresponding period last year. Increased contribution from Mumbai and New Mangalore port this year has made up for the loss from Goa's Mormugao port. However, the share of iron ore trade to the total trade volume is a tad down at 6.7 percent in the period under review as against 6.9 percent in April-December 2016. (see chart)

“This year, KIOCL (Kudremukh Iron Ore Company), as part of Make in India initiative, has resumed imports of iron ore from Odisha via coastal movement and has exported equal quantity of iron ore pellets to Iran. Due to this, volumes of ore handled have doubled (during Apr-Dec) compared to last year,” YR Belagal, traffic manager at New Mangalore Port told Business Standard.

State-owned KIOCL Limited is under the Ministry of Steel which has pelletisation plant in Mangalore. In the period under review, iron ore exports from Goa have declined 38 percent from same period last year as demand from overseas countries like China, Japan and South Korea has been for ore with higher ferrous (Fe) content of 58% Fe. Since Goan iron ore exports with 58% Fe and above attracts an export duty of 30 percent, miners of this region are losing out on the export opportunity. 

“The 30 percent duty is hitting us very hard. Within two months (Oct-Nov) itself, Goan iron ore exports have fallen to less than 700,000 tonne from more than 2 million tonne in the same period last year,” said Glenn Kalvampara, secretary of Goa Mineral Ore Exporters Association.

Goa is a low-grade iron ore miner which exports most of its ore as the commodity does not find application in the domestic steel market which demands ore grade of more than 62% Fe content. Though Goan ore is largely less than 58% Fe, through beneficiation, miners have been pushing up the grade by upto three percent making it suitable for export market. Higher the iron ore export grade, better are the realisations fetched by the commodity in the overseas market. 

“Though beneficiation process adds to the costs of Goan miners, we can still have a decent earning. But due to high taxation which is not uniform when compared to other states, Goan miners are losing out. Apart from export duty (above 58% Fe ore), DMF (District Mineral Fund) 30percent, Goa iron ore fund also attracts 10 percent additional tax which ought to have been subsumed within DMF,” said Kalvampara. “If this export duty is considered, value addition in terms of beneficiation can commence,” he added.

Mumbai Port which is also making up for the loss from Goa iron ore trad is catering to Sajjan Jindal's Dolvi plant as the company has imported 5.5 million tonne iron ore in the period under review. The port had imported equivalent quantity in the corresponding period last year. 

Though the overall iron ore trade seems to be in a comfortable position until December, the final quarter of the fiscal will be crucial as suspension of seven iron ore mines by the Odisha government could have a negative impact on trade volumes for FY18.

The Odisha government early this month suspended operations of seven iron ore mines after leaseholders failed to meet a deadline of 31 December. The Supreme Court had fixed the date for paying penalties for illegally extracting ore between 2000 and 2011.

“Due to the suspension of iron ore operations of some miners in the state, domestic prices of ore have gone up and hence demand to export ore could drop in the coming months. Though we are hopeful to meet the FY18 iron ore trade target, we are currently in the wait-and-watch mode,” informed S.K. Mishra, traffic manager at Odisha-based Paradip Port.

Private miners of Odisha export sizeable quantities of iron ore from Paradip port, while state-owned NMDC ships out its ore via Vishakhapatnam port.

“We do not handle Odisha ore and hence, the suspension of operations in that state should not impact us. We should be able to meet our target of 12 million tonne for current fiscal,” informed P.L. Haranandh, deputy chairman at Vishakhapatnam Port.

With Goan iron ore exports continuing to face an issue amid ongoing suspension of miners' operations in Odisha, it will be interesting to see the contribution of Jan-Mar quarter to the total iron ore trade. Jan-Mar, the final quarter of a fiscal, is part of peak mining season in the country that starts in October.