Hopes rise for return of Indian iron ore exports
There are signs that restrictions and taxes on iron ore exports from India are about to ease. Miners are already starting to talk about the ban on exports from Karnataka in the past tense, and sound increasingly confident that the recent increase in duty on fines and lump exports to 20% will be pared back
There are signs that restrictions and taxes on iron ore exports from India are about to ease.
Miners are already starting to talk about the ban on exports from Karnataka in the past tense, and sound increasingly confident that the recent increase in duty on fines and lump exports to 20% will be pared back.
“From the beginning of April the export ban will be a thing of the past,” Sesa Goa ceo SK Mukherjee told MB’s China Iron Ore conference in Beijing this week.
This could happen by April 4, after India’s Supreme Court has ratified the decision, he said.
Exactly what will happen with the unified 20% export tax is less clear, however. Miners have lobbied the government, the government has listened, but the timing of any reduction is not clear.
Mukherjee said he was “more or less confident” of the tax being reduced, but confessed he did not have a clue when this might happen.
A change is expected by most market participants, with the most talked-about option being that the 20% tax could be relaxed on lower-grade ores.
“India cannot consume lower-grade iron ore. Hopefully, the Indian government will have no choice but to adjust the export duty on lower-grade iron ore with a view to facilitating exports,” a source at another Indian miner said.
The twists and turns over iron ore export duties underline the fluidity of Indian policy-making, especially when prices are high and other stakeholders work to their own agendas.
Policy swings create long-term uncertainty about supply, and also add to short-term uncertainty in the spot market – which was much in evidence at the Beijing conference.
Prices are picking up a bit again, ending last week at $172-174 per tonne cfr on a 63.5% Fe basis. Buyers are returning to the market after weeks of holding off while prices were declining. And some traders are taking in speculative cargoes, in the hope that prices will once again surge towards $200 per tonne.
“Steel mills are coming back [into the market] but no-one is sure about the market, so it’s a thousand, a few thousand tonnes at a time. Most traders feel a little bit lost in the current market, but I think if there are any strong signs on the demand side you’ll see people piling in again,” the second miner said.
Vale’s speech to the conference was typically glowing about the future of iron ore.
“The best return for the shareholder is to produce and sell as much as possible. The maximization of returns happens when we sell as much as we can,” Luiz Meriz, Vale’s China president, said.
Vale’s output will rise to 522 million tonnes by 2015, he said, up from 311 million tonnes last year.
But Meriz’s remarks were tempered by realism about short-term risks to demand.
As China takes steps to calm inflation, small businesses are finding it harder to get loans, he said.
Nor have the effects on steel demand of Beijing’s measures to cool the property market been fully worked through. Higher oil prices could take 1% of global GDP growth, and the impact of the Japan earthquake on the steel market is yet to play out.
It was difficult finding anyone at the conference who was confident that prices would surpass $180 per tonne for any length of time, let alone breach $200 per tonne again.