Iron ore exports likely to drop next year

RELATED NEWS Tata Steel Global Minerals enters into agreement with NML Essar lays foundation of first steel facility in Iron Range ULCOS & Rio Tinto join in combating climate Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Chennai, Oct. 15

India is likely to see an increase in the number of steel-based sectors (such as automobiles, household appliances) in the coming years. This is because, like most other growing economies, India is transitioning itself into industrialisation. This translates directly into demand for steel-making raw materials such as metallurgical coal and iron ore. Global demand for raw materials is also set to increase, which means trade between countries will depend on each one's capacity to meet demand.

Surge in Exports Likely

Despite a rise in consumption, India will see a surge in iron ore exports. Indian exports will increase by 8.5 per cent to 102 million tonnes (mt) in 2008, according to estimates by Abare, Australia's independent government economic research agency. This substantial rise could be partly attributed to domestic producers looking to cash in on the high spot prices in China. However, export costs are forecast to be higher compared with Australia and Brazil due to a combination of export taxes and infrastructural bottlenecks in India.

By 2009, with the increased global availability of iron ore, spot prices will decrease and exports of the high-cost Indian iron ore will also most likely decline. In addition to this, strong domestic demand will push the Indian Government to go in for restrictive measures on the movement of iron ore, which would further reduce its availability for export. Exports may fall by almost five per cent, registering a total of 97 mt in 2009, according to Abare.

Meanwhile, the expected strong growth in steel production and low quality of domestic metallurgical coal reserves are expected to push its imports up. According to Abare forecasts, metallurgical coal imports in India are to grow at an average of 12 per cent a year in 2008 and 2009.

contd on page 2...