Citing cases of countries like Australia and Brazil, the iron ore industry has denounced government’s “fallacious” notion that India would do well by focusing on value-addition rather than exporting ore, a raw material for the steel industry.
The Federation of Indian Mineral Industries (FIMI), the apex industry body, said domestic demand should be the prime factor for setting up of steel and aluminium industries and not the availability of the raw material.
“The contention that just as India is competitive in exporting iron ore does not necessarily mean that it will also be competitive in steel production and exports. The phenomenon can be best explained that India is competitive in the exports of cotton and textiles but not ready-made garments where Bangladesh has an edge,” FIMI’s secretary general RK Sharma said.
Sharma said despite exporting the raw materials for steel and aluminium industries, Australia produced 4.6 MT steel and 1.68 MT aluminium in 2014. Similarly, Brazil produced 33.9 MT steel and 0.962 MT aluminium in the same year. “The underlying reason is that there is not enough demand for steel and aluminium in these countries,” he said.
India has around 110 MTPA steel-making capacity now and hopes to raise it to 300 MTPA by 2025 as the country’s per capita consumption is nearly one-fourth of the global average of 217 Kg in 2014.
Placing the responsibility of raising steel or aluminium demand on the government, the industry body said the government has to free the economy in infrastructure and other steel-intensive areas in terms of usage. With the right emphasis in place now, future steel demand would grow; but that should not be the reason for trying to curtail for exports of iron ore which are not used by domestic steel industry.
The government had in the past tried to curtail exports of iron ore and promote production of value-added products by imposing hefty export duties; but the cheap availability of the raw material did not result in more steel production or its exports, he said.
“It is also surprising that Indian steel industry is having all the raw materials within the country and in some cases, captive mines, and yet it is not able to compete with steel imported from countries which are totally dependent on imported raw materials,” Sharma said.
India has 31,323 MT of iron ore resources, as of April 2013. However, the production of iron ore hovered around 60-65 MT till around 1995. Largely due to pick-up in Chinese demand since 2000, iron ore production and exports peaked to touch at 218.55 MT and 117.37 MT respectively in 2009-10. Both started sliding after the export duty was raised from 5% on fines to 20% with effect from March 1, 2011 and further to 30% with effect from December 30 of the same year.
As a consequence of the export duty hike, India’s outward shipment of iron ore gradually fell to 97.66 MT in 2010-11, 61.74 MT in 2011-12, 18.37 MT in 2012-13, 14.42 MT in 2013-14 and further to 6.12 MT in 2014-15.