India’s miners welcome easier iron ore exports, mills warn of ‘disaster’

A loosening of iron ore export restrictions in India has been welcomed by domestic miners, but steel mills warn that a relaxation of legislation would be a “disaster” for the country’s industry.

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India’s prime minister, Manmohan Singh, said that the government will try to remove iron ore export constraints at a meeting of the Associated Chambers of Commerce & Industry of India (Assocham) on July 19.

The details and timeline for the legislative changes have yet to be revealed.

“We appreciate the announcement by the government of the lifting of the ban, as mining companies will gain new avenues through which to sell their products,” RK Sharma, secretary-general of the Federation of Indian Mineral Industries (FIMI), told Steel First.

“We are selling iron ore in the domestic market at lower prices, which is hampering margins,” Sharma added.

India, once the third-largest iron ore exporter in the world, saw export figures drop by 40% year-on-year to 12.11 million tonnes in the second quarter of 2013, according to government figures.

Steel sector companies believe, however, that the government’s move to relax the rules on iron ore exports will have a negative effect on domestic steel production and on India’s economic growth.

“Steel companies are already facing huge shortages of iron ore and an increase in ore exports will be a disaster,” a steel mill source told Steel First.

“Many companies are operating at 30-50% capacity due to non-availability of ores,” he added.

India’s steel mills have benefited from domestic ore being more readily available since the export legislation started to tighten in 2011, and are unlikely to support any moves to increase iron ore exports.

“Steel companies are buying ores at low prices, so they have a vested interest in seeing that exports of ore do not restart,” Sharma said. “If restrictions are lifted, they will have to pay more.”

FIMI estimates that ore production in 2013-14 will be around 100-110 million tonnes, a drop of 30 million tonnes compared with levels seen in 2012-13.

A ban on iron ore production in Goa and regulatory delays on environmental approvals for mines in Karnataka are the main factors behind the drop in output, Sharma said.

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