- Overseas sales hit by export taxes
- Iron ore production drops as exports decline
- Trend likely to sustain in the short to medium term
Morning Brief: India’s iron ore and pellet exports in January-August, 2022 plunged 62% to 13.25 million tonnes (mnt) against 35.09 mnt seen in the same eight months in 2021, reveals data maintained with SteelMint. The share of iron ore over January-August, 2022, was 6.91 mnt, showing an even sharper 73% y-o-y drop from 26.07 mnt in the same period in 2021. Pellets in the period under review dropped 24% to 6.89 mnt from 9.02 mnt in the same period last calendar.
Fiscal year basis: Meanwhile, on a financial year basis, exports of India’s iron ore and pellets in FY2022-23 (FY23) were at 6.98 mnt, declining an equally steep 62% from 18.13 mnt in the same period last fiscal.
The data also reveals that exports started dwindling especially from June, 2022 onwards, when these plunged over to a mere 0.31 mnt from 2.70 mnt in May. July saw volumes languishing at an equally low 0.51 mnt and August, at 0.41 mnt.
Reasons for fall in iron ore and pellet exports
One does not have to delve too deep to find the reason for the plunge in exports. The government raised the export duty on iron ore of all grades and concentrates to 50% from the previous 30% on high grade and 0% on low grade ore (less than 58% Fe).
That apart, the government slapped an export duty of 45% on pellets from nil previously.
These moves were aimed to quell inflationary pressures. However, the tax hit mining activities and production and also led to a stockpile that impacted prices.
Iron ore and pellet production has dropped in the last couple of months. From 22.7 mnt in May iron ore production declined to 19.1 mnt in June, 2022, SteelMint’s data reveals.
Although pellet production is almost stable y-o-y at 46 mnt over January-July 2022 from 45 mnt in the same period last calendar.
Out of the total 77 mnt of pellet production in FY22, around 33-35 mnt was merchant production of which around 11 mnt was exported but this has been severely impacted.
Prices: As per SteelMint analysis, domestic iron ore fines (Fe 57%) is assessed at INR 1,500/t ($19/t) ex-mines for Barbil, eastern India. On the other hand, ex-mines realization after export duty for similar grade stands currently at around INR 600-700/t ($7-9/t) exw, hence making exports less viable.
Outlook
Considering that the export tax is still under implementation, India’s iron ore and pellets exports are expected to remain impacted in the short to medium term. Production too may be impacted because of the drop in exports.
Recently, the government has unveiled a draft beneficiation policy. It mandates that 80% of the total iron ore below 58% Fe grade produced in a year must be upgraded through beneficiation to 62% Fe grade and above. The idea is to utilize low and lean grade ores, mine rejects, plant tailings etc by adopting suitable beneficiation and agglomeration techniques.
Once this policy gets implemented, then supply of higher grades may improve in the long term.
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