No let up seen in iron ore exports
Amidst the border standoff, China has been buying up iron ore from India, pushing up local prices that has thrown user industries, especially micro, small and mediumsized industries, into an existential crisis. While China's imports of Indian iron ore nearly doubled in 2020, ore prices have more than doubled in India since June, leading to a steep rise in steel prices. Steel producers have been lobbying for a six-month ban on iron ore exports to cool prices.
Despite a production shortage, iron ore exports have shot up by 62 per cent and are expected to touch a new peak in FY21.
As per data from the Ministry of Commerce, iron ore exports between April and November shot up 62 per cent to $2,799 million against $1,726 million in the same period last year. According to rating agency Icra, iron ore and pellet exports rose 66 per cent in volume terms between April and October. At 33.4 million tonnes till October, it is already close to last fiscal's exports of 36.6 million tonnes. At the current run rate, iron ore and pellet exports could surpass the FY12 peak of 47.2 million tonnes.
The exports have been triggered by a rally in seaborne iron ore prices by 45 per cent since April. China has been the largest buyer of Indian iron ore. The exports to China rose 88 per cent to
44.8 million tonnes in calendar year 2020.
At the same time India has been facing a production shortage. Icra estimates domestic iron ore deficit to be 55 million tonnes in FY21. Of the 18 auctioned blocks, which had contributed 53 per cent to Odisha's overall iron ore production in FY20, only seven have started production, leading to the shortage. Ore supply shortage is likely to persist in the near term until new miners ramp-up production.
The shortage of ore has
seen prices rallying by 140 per cent in Odisha since June-end and the prices have rallied 100 per cent in Chhattisgarh as well.
The rising iron ore prices combined with shortage saw steel prices going up by 55 per cent to Rs 58,000 a tonne in January against the yearago month. This has affected the downstream industries. The rising steel prices coupled with the pandemic impact on global trade saw engineering exports fall 13.24 per cent for the AprilNovember period.