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Indian Railways’ decision to reduce the freight rates for raw material export can be a booster for the lacklustre trade, as miners would be willing to clear huge stocks, according to iron ore traders and exporters. “I think this is a good move; it is the right step towards boosting exports,” said Reeta Singh, managing director of Mesco Steel. The company sells iron ore after catering to its own requirement for its pig iron manufacturing plant from an iron ore mine lease allotted to it.
The Indian Railways had on Tuesday announced new tariff for iron ore movement other than domestic purposes “in view of the significant change in the market of export iron ore”. The new transportation cost is Rs 300 per each tonne of iron ore, compared with the earlier minimum price of Rs 1,175 for carrying iron ore meant for exports.
The new rates would be applicable from September 8 to end of March, 2016. Traders and exporters of iron ore say following the reduction, they will be able to sell iron ore at no loss. Indian iron ore is currently traded at $44 (Rs 2,914) a tonne at domestic ports. The selling price is almost equal to that amount after adding royalty, export duty, rail freight, payment to mineral foundation trust, cargo handling cost to Rs 1,200-1,300 a tonne for iron ore fines.
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“There is huge stock of iron ore lying at eastern and western coast of India. The merchant miners would be willing to sell iron ore even at very less margin because they have to fork out money for holding the huge stock,” said a miner in Odisha.
According to estimates, over 30 million tonnes of iron ore fines are stacked in Odisha, the top producer of the raw material. The stocks were piled up because of negligible exports and domestic demand. “The miners need to off-load these stocks as they do not have enough space to store the fines. So, they will be ready to sell even of they get Rs 50 a tonne profit from exports,” added the miner.
Iron ore pellet makers, however, said they wouldn’t get benefited by the rate cut. “We welcome the railway fare cut, but still it is not viable because of weak global demand,” said M V Subbarao, commercial director for KIOCL, the biggest pellet exporting unit.
Chinese traders are currently asking iron ore pellets at $74 a tonne, while Indian sellers said they would occur a loss if they sell below $79 a tonne.
