India reduces export tax on low-grade iron ore

India reduces export tax on low-grade iron ore

The Indian government has reduced the export tax on iron ore fines below 62 percent grade to 50 rupees ($1.23) per ton from the previous tax of 300 rupees ($7.35) per ton, according to an Indian Ministry of Finance announcement on May 3.

However, the export tax on Indian fines above 62 percent grade, and Indian lumps and pellets will remain at 300 rupees ($7.35) per ton.

According to the announcement, the Indian government is intent on controlling high-quality iron ore exports, and has only lowered the export tax on low-grade iron ore concentrate.

"The Indian government intends to reserve domestic iron ore for domestic steel mills, due to the booming Indian steelmaking sector. By the end of 2011, India plans to be able to produce 120 million tons of steel per annum, up 233.33 percent from current production levels," a Mysteel analyst, surnamed Gao, told Interfax on May 8.

Indian domestic iron ore demand is expected to double by 2011 from the current level of 66 million tons to 130 million tons. Iron ore output capacity is also estimated to rise to approximately 240 million tons in the same year.

Overseas steelmakers' involvement will quicken India's steelmaking industry development.

Planned projects include Posco's 12 million-ton steelworks, Arcelor Mittal's 12 million-ton steelworks and Sinosteel's 3 million-ton steel mill.

Provided the present per-annum export growth of 57 percent remains stable until 2011, Indian's iron ore concentrate exports for that year will reach 138 million tons, causing a shortage of at least 8 million tons of iron ore concentrate for domestic steel mills.

"The government wants to restrict high-grade iron ore exports. Indian steel mills mainly use iron ore concentrate above 62 percent grade. The use of low-grade concentrate will raise production costs, as steel mills would be required to build extra sintering facilities," Gao said when asked about the reason for the 62 percent grade boundary.

"Chinese traders and steelmakers seem to have accepted the increased iron ore prices. This amendment of the Indian export tax policy will probably lead to an increase in Indian iron ore exports to China, particularly of Indian fines around 62 percent grade. However, it is unlikely that there will be a reduction in the price of Indian iron ore concentrate above 62 percent grade in China after the change of the policy," Gao noted

"The new policy will result in the price gap between Indian fines above and below 62 percent reaching $5 per ton. In order to avoid the export tax, profit-taking Indian mines may export fines that are tagged below 62 percent grade, which are actually in fact slightly above the 62 percent grade," Gao explained.

China imported 9.83 million tons of Indian concentrate in March, up 38.06 percent from the previous month. The delivery price of Indian concentrate 63.5 percent grade stood at RMB 830 ($107.86) per ton on April 27.

[Source: Interfax China Metals, 18 May 2007]