Traders weigh impact of chrome ore export ban

Traders are keeping their fingers crossed over the government's intention to impose ban on exports of chrome ore, as domestic chrome ore reserves are depleting.

Chrome ore is the only raw material for ferro chrome, which, in turn, is a major raw material for the production of stainless steel.

Union steel minister Ram Vilas Paswan today said, "The government is concerned over depleting chrome ore reserves, and if the need arises it is ready to ban its exports."

India produces about 3 million tonne (mt) of chrome ore and exports about 1 mt of it annually. As per the Expert Group Committee recommendations, the priority is that existing charge chrome and ferro chorme plants must meet 30 years' existing domestic requirements, and about 20 years' need of greenfield and expansion projects. The captive allottees of natural ore should not be permitted to export.

In India, the prices of chrome ore and ferro chrome are governed by the movement in the international prices. So, any dip in the domestic prices will make exporters more competitive in the international market.

GP Agarwal, local agent for GMR Industries, said, "If exports are banned, the prices will decline drastically, having an impact on ferro chrome and, hence, on the stainless steel prices."

A further decline in prices could make the production cost-effective. So if the domestic demand does not rise, there will be a lot of fresh demand coming in from the export markets of ferro chrome, exports of which would not be banned.

In the given scenario, finished products can also be produced at lower costs, which will make the entire industry competitive on a global scale, Agarwal added.

In contrast, an industry expert believes that if there is any further decline in the prices, abundance of the raw material - chrome ore - will hit the entire industry badly, as consequently, a number of chrome ore and ferro chrome units may shut their shops because the industry depends solely on exports.

VK Zodani, general manager (materials), Balashore, Kolkata, said, "We are exporting chrome ore and ferro chrome to China. As Balashore has captive chrome ore mines, the produce of which is used for in-house consumption, there will be no impact of a ban on chrome ore exports on it." But, the industry, as a whole, will be affected by supply glut in the market, he added.

At present, China, where power is cheaper than India, imports chrome ore and converts it into ferro chrome.

Thus, the stainless steel production becomes cheaper. But, once the government bans chrome ore exports, China would have no option but to import ferro chrome. Thus, the cost of stainless steel production would be little higher. Thus, in order to protect the local interest, the ban is welcome, felt another analyst.