Low iron ore demand from China has left Indian exporters gasping for breath as exports have fallen dramatically this fiscal. In April, India exported 115 lakh tonne of iron ore. This figure has plunged to 31 lakh tonne in September, said an official of industry body Federation of Indian Mineral Industries (Fimi).
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"Iron ore exports have been falling consistently and have come down from 85 lakh tonne in May to 31 lakh tonne in September," the official said. Driving this fall are slackening demand in China and rising freight rates.
Data provided by Fimi showed that the Marmagoa port handled 9.11 lakh tonne of iron ore exports in April and the number has fallen dramatically to 2.78 lakh tonne in September. Sesa Goa Ltd's iron ore exports go from this port.
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Harish Khetan, chief financial officer, Resurgere Mines and Minerals India, said, "Iron ore prices have been affected and steel companies across the globe are cutting production. Chinese steel companies are slowing output and the country is a major consumer of iron ore. So this is impacting domestic exports market."
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A statement on China Mining Association's website Chinamining.org said, "Iron ore inventories at Chinese ports have exceeded 60 million tonne for five months in a row so far this year, possibly leading to a market price decline."
Thomas Wrigglesworth, an analyst with Citigroup Global Markets Inc, in an October 5 report, wrote, "With the build-up of material and softening production, iron ore prices have begun to fall in the spot market. The reality of lower iron ore prices, together with other input costs, has created the expectation of lower steel prices and kept buyers off the market in anticipation of lower future steel prices."
He added that August data has shown that steel consumption growth in China has become marginally negative.
An analyst from a Mumbai-based research firm drew attention to a recent fall in spot prices of iron ore in China. He said, "The spot prices were $186 per tonne in July and have come down to $111 now. This has been a sharp fall in two months only because of lower demand and huge inventories at Chinese ports."
Another analyst added, "China imports its requirement of iron ore from Brazil and India. Till recently, India had an edge over Brazil due to lower freight costs even though Indian iron ore is of a lesser quality and needs more coke to burn. India has now lost the freight advantage and raw material prices too have shot up, making Brazilian ore more affordable for China."
Indian Railways has upped the freight rate of iron ore to 200X, the highest ever, making it uncompetitive in the global market. Experts believe that demand for steel will continue to be low due to the high inventory build-up over the past few months.
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"The industry was expecting iron ore demand in China to shoot up after the Olympics but that hasn't happened. This has collapsed the steel market as demand has slumped to very low levels," said the analyst.
