The mining ban in Karnataka has prompted Chinese buyers to identify new overseas markets for iron ore, trade sources said.
The ban in Karnataka is likely to drag down the country?s overall iron ore exports to abysmal levels this year, while it would be an opportunity for other iron ore producing countries waiting to tap the Chinese market.
Talking to FE, Shantesh Gureddi, director of Sri Kumaraswamy Mineral Exports, said that China has already started buying iron ore from other countries. It has built a separate railway line from Ukraine, primarily to import iron ore.
Basant Poddar, managing director of Mineral Enterprises (MEL), and the southern region chairman of Federation of Indian Mineral Industries (FIMI), said the country?s iron ore exports declined to 95 million tonne in 2009-10 from 107 million tonne in the previous year due to the export ban imposed in Karnataka last year.
Now, due to the mining ban in the state, he said, the country?s exports will further fall to 75 million tonne this fiscal. He said the falling exports caused a foreign exchange loss of R8,000 crore in the past one year.
Till a year ago, around half of the total 215 million tonne of iron ore produced in the country was exported. Karnataka produces around 45 million tonne, of which 25-30 million tonne was shipped to China.
The FIMI figures reveal that iron ore exports from India declined by 21.86% to 25.29 million tonne during April-July this year. In April, exports volume tumbled by 29.01% to 8.142 million tonne and 16.89% in May to 9.338 million tonne.
India is the third-largest iron ore supplier to China, next only to Australia and Brazil. Now China, which is the world largest steel producer and iron ore consumer, is in the process of diversifying its iron ore procurement sources by increasing imports from non-traditional countries in a bid to buy the product at cheaper price.
China?s total iron ore imports increased by 8% to 334 million tonnes in the first six months of this year, but the shipping from India declined during this period. The state-run China Daily newspaper quoted Xu Xu, chairman of the China Chamber of Commerce of Metals, Minerals and Chemicals Importers & Exporters, as saying that the proportion of Indian iron ore imports tumbled by 14.9% in the first half of 2011. Iron ore imports from countries other than Australia, Brazil, India and South Africa increased by 4% to 64. 63 million tonnes in the first half of this year, accounting for 19.3% of total iron ore imports.
China is exploring emerging regions, such as Peru, Chile and Canada, and should actively develop strategic relationships with iron ore exporters, including Russia, Vietnam and Kazakhstan, he said.
To avoid its dependence on traditional countries like Australia, Brazil and India, China Iron and Steel Association has set a new target to increase Chinese overseas mining rights for iron ore in the next five years. It aims to get 50% of iron ore from mines whose rights are owned by Chinese steel companies, up from the current 15%. According to the latest report by PricewaterhouseCoopers (PwC), iron ore mining acquisition deals represented 11.8% of the total $71 billion worth M&A deals witnessed in the global mining industry in the first half of 2011. Chinese companies accounted for a whopping 20% of the iron ore acquisition deals, it said.
The mining industry in India started witnessing trouble when the Karnataka government imposed a ban on exports in July 2010. Meanwhile, an NGO filed a PIL in the Supreme Court against illegal mining in the iron-ore- rich Bellary district in the state. Step-by-step in the past one year, the court suspended operations of several mining leases for encroaching upon forest land and imposed overall ban on mining in Bellary district in July this year, before extending the ban to neighbouring districts of Tumkur and Chitradurga too.
In between, the Union government hiked export duty on iron ore to 20% from 5% for fines and from 15% for lumps in its latest budget. ?The duty hike has impacted the bottomline of mining companies. We are not competitive with the rest of the world,? Poddar said.
If the situation continues like this, the analysts feel that the Chinese buyers will not resume their imports from Karnataka even if the ban is lifted in the future as they have started identifying alternative overseas markets.
