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Iron Ore Imports Decline Drastically In 2013-14

Date 29-March-2014
Subject Iron Ore Imports Decline Drastically In 2013-14

After witnessing a record rise in 2012-13, India's iron ore imports have plunged to a five-year low in 2013-14. The steel mills and sponge iron makers together imported 420,000 tonnes of iron ore (mainly lumps) during the first 11 months of the fiscal ended February 2014, showing a massive decline of 86.2% over the previous year.

In 2012-13, iron ore imports touched a record level of 3.05 million tonnes.A combination of factors contributed to the decline in imports like depreciation of rupee against the dollar, higher prices in the spot market and improved supply in the domestic market.

The supply of iron ore improved as the prices of iron ore witnessed an average reduction of Rs 700 per tonne for lumps and Rs 400 per tonne for fines, analysts said.

"Sponge iron makers switched over to domestic lumps. There was no export of lumps from India in the last three years, which resulted in improved supply domestically. NMDC also reduced prices during the year, which resulted in buyers preferring domestic supply over imports. Rupee depreciation also contributed," said Prakash Duvvuri, head of research at OreTeam, a Delhi-based iron ore research firm.

But on the other hand, the exports to India shrunk mainly due to the high currency conversion rates and a slowdown in the domestic demand for steel and scrap, he said.

He said companies like JSW Steel, Bhushan Steel and Welspun cut down on their imports this year. In 2012-13, JSW alone had imported over two million tonnes, while this year, they were out of imports.

Iron ore prices were ruling at $130-133 per tonne in the spot market during the most part of the year 2013-14. However, prices have come down drastically to $110 per tonne as of now. "The decline in prices in the spot market internationally will be helpful to coast-based steel mills once again. In the next fiscal, there is a good case for them to import as the spot prices are set to fall further and might touch $85-90 per tonne in the next fiscal," Duvvuri said.

JSW Steel has one of its plants at Dolvi on the coastline near Mumbai in Maharashtra. It had imported ore for this plant in 2012-13.

Though there was not much rise in the domestic production of iron ore this year, production improved marginally in Karnataka to around 18 million tonnes.

As a result of the decline in spot market, the exporters from eastern India mainly in Odisha are likely to divert their stocks to the domestic market.

"It would make a good business sense for steel mills to import a high quality iron ore (65% Fe) from Brazil at Rs 5,000 per tonne rather than buying a little lower grade ore from within India for Rs 3,500 per tonne. Also, the rupee might further appreciate thereby bringing down the import cost in the coming days," he said.

The lower prices for iron ore in the spot market also makes up a good opportunity for global producers like Vale or BHP to enter into a long-term supply contracts with Indian steel mills, he added.

Iron ore imports (In million tonnes) Year-Quantity 2009-10-0.88, 2010-11-1.85, 2011-12-0.87, 2012-13-3.05, 2013-14*-0.42, * In 11 months of FY14 Source: OreTeam Research

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