Indian pellet export shipments are going strong in 2020 much like the last couple of years with strong demand from China.However, the possibility of a jolt to exports can’t be ruled out.
SteelMint has accessed a letter undersigned by a competent authority from the Department of Legal Affairs, Ministry of Law & Justice dated 10th Sept’20, which clarifies that prior to a notification by the ministry dated 26th Sept’14 (notification attached) the position of exports of iron ore pellets was that only pellets manufactured by KIOCL, under the export policy of State Trading Enterprises (STEs), could be shipped out of the country.
Amendment in export policy of iron ore pellets manufactured by KIOCL -26 Sept’14
Subsequent to the notification, while the export item remained iron ore pellets manufactured by KIOCL, the export policy was changed from ‘STE’ to ‘free’, with the export restriction, however, being “Export by KIOCL Ltd. Bangalore or any other entity authorized by KIOCL”.
The letter mentions that the necessary classification and amendment dated 26thSept’14 was the result of requests and recommendations by both the Ministry of Steel and the Ministry of Commerce. The word “free” substituted for STE, it clarifies, “only means any entity authorized by the Kudremukh Iron Ore Ltd. Bangalore”.
“Therefore, exports of iron ore pellets by any other company other than KIOCL or any other entity authorized by KIOCL is not in consonance with the notification,” the letter states.
The DGFT amendment in 2014, mentions only KIOCL as the exporting company, including other companies/entities authorized by the 100% export-oriented unit. So it doesn’t mention the legality or otherwise of exports carried out by any other company except KIOCL.
SteelMint’s subsequent enquires with the Department of Legal Affairs didn’t elicit any definite response. The matter is with DGFT, or so we were given to understand.
Exports & Outlook
India’s installed capacity of pellets is about 90 mn t and production is 65-70 mn t out of which 12.5 mn t gets exported.
Indian pellet export volumes in CY’19 were recorded at 13.01 mn t, up 59% on year, according to data maintained with SteelMint. Exports have increased sharply in the last few years from around 10 mn t in CY’17. Major exporters were BRPL, JSPL, KIOCL, and the Rashmi Group.
China has continued to remain the largest destination for Indian pellets and occupied a share of nearly 75% of total Indian exports in CY’19.
The key reason behind the hike in Indian pellet exports is global supply crisis due to Vale’s tailings dam disaster and the absence of Samarco from the global market.
In addition, Chinese pollution control norms have triggered demand for high-grade ore i.e pellets and lumps.
If exports other that those by KIOCL are restricted, there would be limited impact in the short-term as Chinese port stocks of pellets are roughly around 10 mn t.
However, in the long-term the impact could be felt in increased usage of lumps by Chinese mills as they would be forced to make up for the shortfall in Indian supplies. Also, with Samarco expected to start production in CY’21, global pellet availability may improve.
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