Indian miners to export mineral in high price Chinese market.

China maintains a strategic interest in India’s iron ore, especially higher grade mineral, to balance supply from its current sources – Australia and Brazil.

“Indian iron ore is essential for China in managing prices as it would want to avoid any price cartel or monopoly by major suppliers,” said an industry source at the Singapore Iron Ore Forum, held 27 April 2017 in Singapore.

Indian iron ore is exportable at US$60-$70 per ton, including the high 30 per cent export duty imposed by India on fine above FE 58% content. This is because domestic prices in India are low at US$20/t at peat head and US$40/t at ports, according to estimates given by traders.

Comparatively, Indian mines are resuming production, with output projected to exceed 200 million tons this year, up from 185 million tons a year ago.

Traders expect iron ore exports above 40 million tons this year. Last year’s exports were 25-30 million tons of 52-58% FE content, rated as a low grade but still blended by Chinese mills to produce mostly long steel for construction sector.

Higher grade iron ore prices have peaked at US$95/t in March, according to traders. Such high prices will see a big increase in Indian iron ore shipment to China, even including the 30% export duty levied by the Indians.

Indian miners would want to monetize the mineral, some having resumed production after clearing years of legal/court cases.

Indian iron ore supply to China was 1.5 per cent last year (2016), down from 10% about five to six years ago.

Iron ore usage in India has been low due to still weak steel demand in a country, which has planned massive infrastructure with daily announcements of projects by Prime Minister Narendra Modi’s government.

Indian mills are estimated to have produced 112.5 million tons in 2016, and are due to increase capacity to 300 million tons by 2025 or at least by 2030. Capacity expansions are slower than expected.

India should also relax its 30 per cent export duty on higher grade iron ore with FE content of over 58 percent and monetize the resource, said an industry trader at the Singapore Iron Ore Forum.

“India has a market advantage given the demand potential. But the cost of setting up a steel mill is 30% higher than that in China,” said Li Xinchuang, president of China Metallurgical Industry Planning and Research Institute, an umbrella body of the entire Chinese steel industry.

This is mostly due to higher land and financing costs in India.

In China, it cost US$45/t for green field mill to produce construction steel, according to Li.

Li said he would like to see cooperation between Chinese and Indian steel sectors, especially supplying.

Big steel mills in India are operating at full capacity while smaller ones are not at par – this puts average industry operation at 85% which is good compare to global steel mill operations. But this is low if considered by the announced infrastructure and industrial programmes in the country.

Also, the Indian steel mills are producing on order-signed basis with no inventory – this means a sharp increase in prices when demand surges.

Traders said this will disadvantage projects and may lead to more imports, mostly from China, in the coming years. fii-news.com