Iron ore exporters report 10 % drop in revenues

A majority of iron ore exporters, including mining firms, have reported a 10 per cent dip in their top-line growth in the last two months as the rupee continues to appreciate against the dollar.

The iron ore exporters had already witnessed a decline in their profit margins, following the imposition of a duty amounting to Rs 300 a tonne on overseas sales.

"All the iron ore exporters are suffering on account of rupee appreciation. The centre has to intervene and stabilise the rupee. Already, the iron ore sector is facing tremendous problem with exports declining significantly on account of the export duty," S B Chauhan, advisor to the Federation of Indian Mineral Industries (FIMI) told Business Standard.

Though the markets for Indian iron ore are China, Japan, South Korea and the West Asian countries, contracts are designated in dollars. The price of iron ore in the international market varies depending on the grade. While a tonne of high grade iron ore is priced at $63, the medium grade variety is priced at $60.

According to FIMI, the appreciation of rupee against dollar has dented the net margins of the mining industry. The exporters are losing between Rs 200 and Rs 250 on a tonne of iron ore, due to the rupee appreciation. "The net profit, which took a serious hit following the imposition of the export duty, will decline further if the same trend (rupee appreciation) continues," FIMI representatives said.

Minerals Sales (MSPL), the second largest private iron ore exporter in India, has witnessed 10 per cent decline in its top-line in the last two months.

"All iron ore export firms have taken a hit. It is a double-whammy for us. For every tonne of iron ore exported, we are losing close to Rs 550 by absorbing the rupee appreciation and export duty. A 10 per cent decline in top-line can make a lot of difference to any company. The government has to step in," MSPL executive director, Rahul Kumar Baldota said.

The situation is no different for other iron ore mining and export firms. A number of companies in the private sector such as Sesa Goa, Dempo Mining, Salgaocar Mining, Chowgule Group and the government-owned Minerals and Metals Trading Corporation are engaged in exporting iron ore.

"Apart from hedging, the iron ore exporting firms have no other option. We have also hedged our earnings. However, the prevailing scenario is not encouraging," Baldota added.