With the closed mini steel mills in China resuming operations gradually, Indian exporters are hoping iron ore shipment to rise at least by 5.5 per cent to match the last year’s level.
Last year, India’s total iron ore exports were recorded at 104.27 million tonnes (93.79 million tonnes in 2006-07) on high Chinese demand. However, during the nine months period of the current financial year, total shipment declined by 5.5 per cent to 64.47 million tonnes from 68.15 million tonnes in the corresponding period last year.
The gradual opening up of mini steel mills is significant as Indian miners were expecting a decline in overall shipments thereby, worsening their economic health which is currently badly hit by lower raw material prices.
“Though the demand for iron ore is currently low as Chinese traders are busy celebrating their New Year (January 26), we are confident that the shipment would pick up to match at least the last year’s level if not more,” said R K Sharma, secretary general of the Federation of Indian Mineral Industries (FIMI).
The biggest advantage for Chinese iron ore importers, who buy about 85 per cent of India’s iron ore shipment, is the price of iron ore which is currently quoted $30 lower between $60-65 per tonne than the global benchmark price of $90 - 95 per tonne. Thus, large steel mills that contracted long term deal with raw material suppliers are at a loss in the current market sentiment, Sharma added.
“Last week, we sent out our first shipment to China for this season and we have other orders too for their execution in the days to come. Thus, we see that Chinese steel mills have started floating orders to Indian markets to source iron ore on spot basis rather than for signing out a long term contract,” said Haresh Melwani, CEO, H L Nathurmal & Co, a leading iron ore miner and exporter from Goa.
Last year, about 42 mini steel mills in and around Shanghai were forced to suspend production as a preventive measure for the Olympic Games preparation in September. But, these steel mills delayed resumption because of global economic slowdown that resulted in lower steel demand.
On the other side, in contrary to a sharp decline in neighbouring Japan and South Korea, China’s crude steel production rose 7.3 per cent in December, the first increase in the last six months. This means the government is keen on increasing infrastructure spending further. China’s December crude steel output rose to 37.79 million tonnes from 35.19 million in November, but a 10.5 per cent decline from the same period a year ago, National Bureau of Statistics data showed.
For the full calendar year, crude steel output rose a marginal 1 per cent to 501 million tonnes in China, the world’s biggest steel consumer and producer.
According to an analyst, China’s steel industry is utilising around 70 - 80 per cent of its installed capacity, a rise from around 60 per cent in early November.
