India loses its market share in Iron ore exports market

India's efforts to clamp down on illegal mining have handed
a $15 billion lifeline to global iron ore giants, and there could be more to
come.

Steps taken by central and state authorities to clean up the
mining and export of iron ore have shut down output in two key producing
states, slashing shipments and forcing steel mills to import a raw material the
country has in abundance.

Now the Shah Commission, whose report on top exporter Goa
led to the state government's ban on mining in September, has turned its
attention to the last major iron ore producing state of Odisha.

The exit of the world's third-largest iron ore exporter has
been perfectly timed for miners in other countries seeking alternatives for
their growing supplies as appetite from top buyer China slows.

The world's biggest producers Vale, Rio Tinto and BHP
Billiton have taken some of India's market share in China, Japan and South
Korea, and now are even eyeing exports to their erstwhile competitor.

“It will be a huge bonus for big miners. There'll also
be a premium emerging for lower grade ore and India's absence will drive
Chinese interest into Fortescue-type products “, said Graeme Train,
commodity analyst at Macquarie in Shanghai”.

Annual exports, which in the past decade peaked at nearly
106 million tonnes, may dwindle to as low as 5 million tonnes over the next
year, analysts say.

India’s exit from the global exports market is one reason
for a rebound in iron ore prices, which this year fell below $87 a tonne to
their lowest since 2009 due to China's slowing economic growth.

Also, the flipside is that India is also starting to ship in
iron ore in significant quantities.

India has imported 9 million tonnes of iron ore so far in
the fiscal year that began in April, estimates Basant Poddar, vice president of
the Federation of Indian Mineral Industries, and could ship in 15 million
tonnes for the full year.

“It is a sad situation that we cannot mine in our own
country legally and supply to our own domestic steel industry,” he added .

Importers include big producers Essar Steel ESRG.UL, Bhushan
Steel (BSSL.NS) and JSW Steel (JSTL.NS), he said.

For the next fiscal year, India's iron ore exports may be no
more than 15 million tonnes, while imports could climb to 20-25 million tonnes,
said Poddar, making the country a net importer for the first time ever and
hurting the competitiveness of its steel producers.

“Being an iron ore-rich country like India, it doesn't
make sense to be producing steel on the basis of imported iron ore. It doesn't
work out economically for the steelmakers,” said Gunjan Aggarwal, senior
consultant at research firm CRU in Mumbai.