Weak Chinese demand to hit ore exports

MUMBAI: India, the world’s third-largest iron-ore exporter, may face a decline in shipments of as much as 25% because of softening demand in China and an increase in taxes.

Exports may fall to as low as 75 million metric tonnes in the year ended March 31 from an estimated 100 million tonnes in the previous year, Federation of Indian Mineral Industries President Siddharth Rungta said on Friday in a phone interview.

Iron ore prices in China, the biggest consumer, dropped in the past week amid concern government measures to cool its real estate market will curb demand. India raised the export tax on lumps, a type of the steelmaking ingredient, to 15% from 10%, the second increase in five months, Finance Minister Pranab Mukherjee said on Thursday.

“There is a declining trend in iron ore exports this year and since Indian mills consume far less than what is mined, there will be a drop in ore output,” Rungta said.

Rail freight rates, which increased almost 50% in the last three months, may add to the drop in shipments, Rungta said. Indian Railways will raise charges for iron ore meant for exports, Chief Project Manager for Freight Juel Kujur said on Friday in an interview. Freight charges will be increased by Rs 100 ($2.25) a tonne to more than Rs 2,000 starting Saturday, he said.

Iron ore spot prices may drop about 30% in the coming weeks on concern China is slowing the pace of economic growth, UBS said on April 22.

India is estimated to have produced more than 220 million tonnes of iron ore in the year ended March 31, of which local plants bought about 95 million tonnes and about 100 million tonnes were exported.

On December 24, the government imposed a 5% duty on shipments of ore fines and doubled the tax on lumps to 10%.