The Indian government has imposed a 5 percent duty on exports of iron ore pellets in a move that will further clamp down on raw material exports and ensure iron availability for domestic steel producers.
Since December 2011, India has levied a 30 percent tax on exports of iron ore fines and lumps, and sought to curb mining exports from Karnataka and Goa states. These curbs are estimated to have cut India’s iron ore exports by around 85 percent (roughly 100 million tons) since their implementation.
Iron ore pellets, the subject of India’s new 5 percent duty, were previously exempt from these taxes due to negligible exports.
“However, in April-November 2013, exports of iron ore pellets have risen sharply, causing an apprehension about shortage of iron ore in the country,” India’s Ministry of Finance said in a statement on Monday. In recent months, the establishment of new processing units across India have driven this increase.
In past years, India exported between 2 and 3 million metric tons of iron ore pellets annually, which rose to between and 4 and 5 million metric tons in the current financial year.
In response to this surge, Indian steel producers lobbied last month for the government to implement a tariff on exports of iron ore pellets to safeguard domestic supply.
China, the largest importer of iron from India and the world, is likely to be most significantly impacted by the new tariff. Last year, Indian iron ore exports to China dropped 65 percent to 11.7 million tons last year according to Chinese customs data – primarily due to the new taxes introduced in 2011.
“This is a retrograde step, and one more blow to the industry,” Basant Poddar, Vice Chairman of the Federation of Indian Mineral Industries, said. “On one hand, they want us to go for more value addition, but on the other hand they are imposing more taxes.”
Until two years ago, India was the world’s third-largest iron-ore exporter. This year, however, India’s overall exports are estimated to be only 15 million tons combined with 67 million two years ago. Exports between 2009 and 2010 stood at 118 million tons. Revenue lost from this decrease is estimated to exceed US$17.5 billion in the past two years.
On Monday, the Chinese National Development and Reform Commission (NDRC) encouraged Chinese steelmakers to buy up stakes in global iron-ore assets, mines, mills, ports, railways and energy facilities in the interest of Chinese strategic security.
Currently, China imports roughly two-thirds of its iron ore, and some domestic projects have experienced delays due to a lack of supply in recent years.
“China’s iron-ore demand will still rise, its reliance on imports won’t change, and the degree of monopoly in global iron-ore resources will still keep increasing,” the NDRC said.
Despite India’s new duty on iron ore pellets, sagging Chinese iron ore demand around the Lunar New Year is expected to counterbalance the tax. Many economists additionally point to increasing stockpiles of iron ore domestically as steel demand grows more slowly along with China’s economy.
Source:- india-briefing.com
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