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Low China demand hits iron ore exports

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Dilip Kumar Jha Mumbai
Last Updated : Jan 20 2013 | 7:34 PM IST

India’s iron ore exports may not achieve last year’s figure of 104.27 million tonnes because of a steep fall in demand from China, the largest buyer of Indian steelmaking raw material.

Chinese demand started declining last month and continued till now. Spot orders from China has dried up completely, while traders are waiting for the revival trend to emerge in the global economy for fresh contracts for the new financial year. India exports over 85 per cent of its total iron ore to China.

In January, China’s finished steel production declined sharply by 54 per cent to 1.91 million tonnes from the comparable period last year. According to an analyst, global crude steel production is expected to fall by 9 per cent to 1.210 billion tonnes this year, which will be the first drop in output since 1998.

“Looking at the spot orders in December, January and February we were confident to achieve this figure. But, we are doubtful now,” said R K Sharma, Secretary General of Federation of Indian Minerals Industries (FIMI).

After a sluggish trade in October and November, post debacle of Lehman Brothers that dumped global economies into a threat of recession, sales resumed in early this year. According to industry sources, the two aforesaid months witnessed a total export decline of 15-20 per cent that recovered in the subsequent three months.

Shipment from Bellary-Hospet iron ore zone has declined substantially with no major exports orders have been recorded so far this months.

Only existing orders are being executed. From Goa, also, exports are expected to halve to about 3 million tonnes in March this year from the last year’s level of 6 million tonnes in the corresponding month last year.

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“Off take from China is very low which is likely to continue for some more months. Therefore, iron ore shipment from Goa is expected to remain grim in the months ahead. For the current financial year, however, total exports from Goan and non-Goan iron ore from the state is expected to remain closed to 39.5 million tonnes, same as last year,” said Glenn Kalavampara, Secretary, of Goa Mineral Ore Exporters’ Association (GMOEA).

In the previous three months, however, total shipment from Goa zoomed to approximately 17 million tonnes, a rise of 20 per cent from the same period last year.

Meanwhile, prices of iron ore have declined by 20 per cent since the last week of February from the level between $55-60 per tonne to $48-50 per tonne. There is no buyer even at $48 per tonne, said Sharma.

Global steel demand is currently down around 20 per cent, but with destocking nearing an end, the industry is likely to see some signs of recovery by the end of the year.

China, the world’s largest steel producer with an annual output of about 500 million tonnes, witnessed a marginal 2.6 per cent rise in steel production against the global output decline of 1.2 per cent.

In turn, Chinese steel exports have also declined dramatically by 63.5 per cent to the South Korea and 75 per cent to the European Union in December 2008.

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First Published: Mar 19 2009 | 12:29 AM IST

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