KOLKATA: At a time when overall exports have fallen for the 12th straight month, state-run miner NMDCBSE 4.39 % has initiated exports of iron ore. The move, which comes at a time when spot prices of iron ore have crashed to a seven-year low of $38 per tonne, seems to have miffed the domestic steel industry. The latter is questioning the logic and timing of the exports, particularly since, NMDC's price realisation is believed to be about a quarter of the domestic rates. "We will be exporting around five lakh tonne to Japan till March 31, 2016," a senior NMDC official said in response to a query from ET. "As on date exports are cash positive for NMDC," he added, while pointing out that export realisation depends on a variety of factors.
In June this year, the Cabinet approved renewal of the Long Term Agreement (LTA) with Japanese and Korean Steel Mills to export up to 5.5 million tonne to Japan and Korea annually over the next three years (April'15 to March 2018). "These agreements will help continue this relationship and strengthen Indo-Japanese collaboration in several areas like technology transfer, joint venture, investment, etc. The agreement will also help utilize surplus production of iron ore currently available in India," a government statement in June said.
However, an export duty of 30% on fines and high railway freight proved to be a major dampner. It was only after the government decided to lower the duty on exports to 10% and slash railway freight charges on exports by almost 46%. Rs 1572 per tonne from Rs 2900 per tonne earlier that NMDC managed to export the first consignment in November 2015. For October-December 2015 (Q3) the export price benchmarked to the global Platts Index is US$ 51.69 per dry metric tonne.
Industry watchers have pointed out compared to NMDC's net sales realisation from domestic market, its export realisation which varies between consignments -is estimated at less than one fourth of it. "The net sales realisation from exports would have been negative had duty not been reduced on NMDC's exports to 10%," they said.
Analysts feel the PSU miner has to meet its exports commitments under the LTA. Saurav Chatterjee, an analyst at CARE Ratings said: "NMDC has to fulfill its export commitment. Also, with a cut in export duty and railway freight, exports would be justified at this point when domestic offtake remains poor."
Steel industry sources feel NMDC should have sold the material in the home market where price realisation is better and this would have encouraged value addition at home.
Source :economictimes.indiatimes.com
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