Move follows China’s decision to ban imports of ore with 55-58% iron content.
Low-grade iron ore miners in Goa reduced their production by 30 per cent to avoid stockpiling ahead of the monsoon. The action follows China’s decision to suspend low-grade iron ore import from India last week and poor domestic demand.
Haresh Melwani, CEO of H L Nathurmal & Co, a Goa-based miner and exporter, confirmed the development.
About 103 operational mines in Goa contribute over 45 per cent of India’s total iron ore exports. Almost 90 per cent of the total shipment to China is low-grade iron (fines) not used in India because of abundance of high-grade ore here.
Low-grade iron ore is processed to produce high grade ore with maximum Fe content before it is used as a raw material for steelmaking. The low-grade variety is a by-product of high-grade ore mining.
India produces around 220 million tonnes of iron ore every year and exports close to 105 million tonnes. While a large quantity is exported to China, Korea, Japan, and afew other countries constitute about 10 per cent. However, major players in the industry, including Sesa Goa, have not been affected. P K Mukharjee, Managing Director of Sesa Goa said in an email response, “Sesa is not impacted so far.”
Several iron ore exporters — low quantity producers — have refused to ship high-grade ore to China as a mark of protest. “They will have to withdraw their decision sooner or later,” said R K Sharma, secretary general of the Federation of Indian Mineral Industries (FIMI).
Meanwhile, FIMI has forecast India’s ore exports to decline significantly if the ban continues. “If the Chinese government wants to continue with steelmaking plans as projected, the country will have to lift the ban on low-grade ores,” said Sharma.
China plans to produce 700 million tonnes of steel next year compared to 600 million tonnes during the current year and 534 million tonnes in the previous year. As a thumb rule 1.3 tonnes of high-grade ore is required to produce one tonne of steel. The requirement for the low-grade variety would be proportionately higher.
“Is China ready to pay four times the price of fines for lumps?,” Sharma asked. Usually, China imports lumps (below 50 per cent Fe content) at a cheaper rate and converts it to a higher grade with minor investment. “If the same has to be imported, the country will have to pay four times the additional amount.”
An MSPL spokesperson said, “We do not plan any production cut at a time when iron ore prices are robust. Last year was different and the situation forced us to cut output.”
Price of iron ore lump is currently hovering around Rs 6,500 (US $146) per tonne for 63.5 per cent Fe content. While low-grade ore of 55-58 per cent Fe content is quoted at $120-125 per tonne. The existing prices of high-grade iron ore above 63.5 per cent Fe content is traded between $180-$185 a tonne c&f. Analysts forecast the price to hit the $200 mark soon.
