Iron ore exports in FY13 set for 37% decline to 45 mt

High export duty and differential freight charges by the railways have made export unviable

Iron ore exports are likely to decline to about 45 million tonnes (mt) during the current financial year (2012-13), showing a drop of 62 per cent compared to an all-time high of 117 mt exported in 2010-11 and 37.7 per cent fall from the last financial year’s 62 mt.

“Exports are no longer viable following a high export duty of 30 per cent and differential freight rate charged on iron ore for domestic and export use by the Indian Railways. Also, the ban on mining in Karnataka has added to the industry's woes,” said R K Sharma, secretary general, Federation of Indian Mineral Industries (Fimi).

For the first quarter ended June 2012, exports declined by 45 per cent at 11.9 mt compared to 21.6 mt in the corresponding quarter last year.

“Except for Goa, no state is exporting. There is no freight cost for Goan miners due to the proximity of port. Also, they use river transport, which is very cheap. In the long run, only Goa would continue to export,” Sharma said.

Presently, iron ore prices in international markets have dropped to $97 per tonne as against $150 per tonne a year ago, which is a drop of 35 per cent. “Exports from Goa have been showing a declining trend over the last 15 days. Chinese buyers might prefer to buy high-grade ore at $97 per tonne rather than buying low-grade ore originating from Goa. Hence, overall exports in the third quarter are likely to drop further,” an industry analyst said.

The railways charge Rs 700 per tonne as freight for movement of iron ore for domestic consumption, while it charges Rs 2,800 per tonne of ore meant for exports. This differential tariff has discouraged miners from exporting ore, Sharma said.

The ban on exports imposed by Karnataka since July 2010 has also contributed significantly to the drop in exports of iron ore. Orissa’s exports have come down mainly due to differential railway freight rates.

Due to the problems in India, international majors are gaining an upper hand in the export market. Australia and Brazil have taken advantage of India’s internal problems and have gained an upper hand. They are gaining at the cost of Indian miners, Sharma pointed out.

He said the Fimi has written to the mines and finance ministries to reconsider the 30 per cent export duty on export of iron ore. “We recently met Finance Minister P Chidambaram and requested him to reduce duties on export of iron ore,” Sharma added.