Importer Concern at India Iron Ore Duties

In a move likely to severely harm Chinese importers, India has announced it will raise duties on its iron ore exports, a sector accounting for 23 percent of China' s total imports, industry insiders announced yesterday.

The plan, which took effect on March 1, was first announced

by India 's Finance Minister in late February. From now on, each ton of iron ore will carry with it an export duty of Rs 300 (US$6.78).

"The policy will have considerable impact on the country's iron ore imports," said an anonymous source at the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters.

The Chamber of Commerce summoned officials for a conference in Beijing yesterday to discuss the fall-out from India' s move and possible responses, but no details of any outcome were revealed.

India now stands as the third-largest iron ore exporter for China , trailing Australia and Brazil , with a 23 percent market share. 

Experts were pessimistic as to the outcome with Zhang Dongliang, an analyst with the steel consultancy Shanghai Mysteel, forewarning that Indian iron ore exports could well plummet while domestic iron ore prices would soar as a result.

The move by India came as a shock to unsuspecting Chinese importers with Ding, a trader with Hong Kong Pioneer Metals Co Ltd, one of mainland's largest iron ore traders, feeling that Indian iron ore would lose their price advantage over Brazilian and Australian ores, a former weapon relied on by India.

Ding's company has temporarily suspended all iron ore sales, since their domestic steel mills cannot take such a sudden price hike. Further complications have resulted in iron ore imports from Australia and Brazil also being halted after a surge in demand for these countries' iron ore.

It is estimated that pig iron production costs would increase by at least 80 yuan per ton if steel mills use Indian iron ore.

However, Pioneer Metals' Ding predicted this would be a short-term affair, adding that avenues of negotiation with suppliers would discuss the free-on-board price to help offset the offending price increase.

India's move comes at a bad time for Chinese steel mills and importers who had turned to the Indian market after Australian and Brazilian miners massively increased their iron ore prices over the last three years.

2007-03-07