NMDC may Resume Iron Ore Exports from Dec’15

Post reduction of 20% export duty for NMDC, the miner may resume iron ore exports from Dec’15. Net realization is very low as compared to its domestic iron ore offers.

India’s single largest iron ore exporter-National Mineral Development Corporation (NMDC) may resume exporting high grade iron ore from Dec’15.

Indian govt. on 16 October, 2015 reduced export duty on iron ore exported by NMDC to Japanese and Korean mill under Long-term Trade Agreements (LTAs) by 20%. Current duty applicable for NMDC will be 10% for high grade shipments made under LTAs.

Indian govt. on 24 June, 2015 approved NMDC’s LTAs for supply of iron ore to South Korea & Japan. Under new long-term agreement, about 3.8 to 5.5 MnT of Indian iron ore mined by NMDC will be shipped to these countries by government-owned trading house MMTC Limited. Sources say they will follow quarterly average price index.

NMDC’s iron ore sales are expected to move up post reduction in iron ore export duty. In this financial year, the company sold 13.11 MnT iron ore in 1st half of FY16. Reduction in iron ore export duty is expected to boost company’s iron ore exports which remained nil in 1st half of FY16.

Looking at the continuous downturn of sponge iron prices and weak demand from sponge iron manufacturers there are chances that NMDC may cut lump prices for Nov’15 deliveries. However, fines prices are less likely to witness any reduction next month owing to decent demand. Current prices of Baila lump (Fe 65%) is INR 2,500/MT and those of Baila fines is INR 1,460/MT (prices excluding Royalty @ 15%, DMF @ 30% of Royalty & other taxes).

Below is an estimated analysis of the  cost of export of high grade iron ore fines via Vizag Port after the revision of NMDC’ s iron ore export duty.

FoB price as per index
1 USD=65 INR
Source: SteelMint Research