Chinese iron ore demand slacking

Indian iron ore producers are asking their government to remove the current export levy as Chinese demand has dropped and prices fallen. Almost 75% of Indian iron exports - led by Vednta's Sesa Goa, are destined for China; in September exports fell by almost a third.

NO FRESH DEMAND FROM CHINA

Iron ore miners in India seek export tax removal as prices fall

Biman Mukherji

Reuters

23rd September 2008

NEW DELHI- Indian iron ore industry has asked the government to remove a 15 percent duty on exports following a sharp drop in prices and falling demand from China, the main buyer of the ore, an official said on Tuesday.

The levy was imposed in June after the steel industry said iron ore exports should be discouraged to ensure enough raw material for the domestic firms.

S.B.S. Chauhan, an advisor to the Federation of Indian Mineral Industries, representing private and state-run miners, said the duty had pushed prices down by about 40 percent over the past three months.

He said medium grade iron ore prices had dropped to $75 to $85 per tonne free-on-board from $130 to $140 in June, making the business unsustainable.

"Unless demand from China increases, mines will have to curtail their production," Chauhan said, adding a price below $100 a tonne was unviable for the industry due to steep increases in transportation costs.

Sesa Goa, Dempo and Salgaocar from India's western region and Essel Mining and Rungta group of mines from the eastern sector are among the members of the federation, which submitted the note to the government on Saturday.

State-run National Mineral Development Corp (NMDC.BO) is also a member of the federation.

Nearly 75 percent of India's annual iron ore exports of about 100 tonnes go to China.

Exports in the first half of September dropped to 1.99 million tonnes from 2.7 million tonnes in the same period last year, Chauhan said.

Sales in August were also lower at 4.57 million tonnes against 5.39 million a year earlier, he said.

Chauhan said there was no pick up in Chinese demand even after Brazilian miner Vale demanded an increase in term iron ore prices, effectively erasing an Asian discount that offset higher freight costs and bringing on level with European prices.

"As of now there is no fresh demand from China despite Vale's demand for higher contracted prices," he said.

Chauhan said miners had cancelled 10 million tonnes of iron ore transported by rail since July due to falling demand from China and domestic consumers. (Editing by Ranjit Gangadharan)

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