Iron ore export to China destabilises steel production in India

Spike in iron ore export, largely to China, has made the lives of Indian steel makers miserable. Though global steel prices have been high in the first four months of this year, producers are struggling to supply as there is a huge shortage in raw material, iron ore.

In the first four months (January-April), iron ore exports from India increased by 66 per cent to 22.42 million tonne (MT). About 90 per cent of the export goes to China. The country, which is the world's largest steel producer, imported 20.28 MT of iron ore from India in the first four months compared to 12.24 MT in the same period last year.

The price of hot rolled coil (HRC) increased to Rs 70,000 per tonne as compared to Rs 45,000 at the same time last year. On the other side, NMDC's iron ore price jumped 156 per cent to Rs 6,560 a tonne in April-beginning, compared to Rs 2,560 a year back.

Due to economic disruptions post Covid-19 outbreak, iron ore production fell sharply by almost 44 million tonne (MT) to 202 MT in 2020-21 vis-a-vis 246 MT in the previous year. However, the country's exports increased by 62 per cent to 60 MT against 37 MT. It created an overall short supply of around 70 MT after adjusting incremental exports and drop in production.

Because of huge volumes of iron ore exports, Indian companies are not able to evacuate their share of raw material from eastern India, especially Odisha, the major iron ore exporting state, say industry sources. The logistic congestion had recently disturbed production of JSW Steel's Dolvi plant in Maharashtra.

Steelmakers in the country have demanded an iron ore export ban as the shortage resulted in a spike in prices of raw material as well as steel. Union Minister Dharmendra Pradhan a few months ago had said the government was considering imposing a short-term ban on exports of iron ore in the wake of domestic shortage. But the government did not take any steps.

Big steelmakers with captive iron ore mines like Tata Steel, JSW Steel and ArcelorMittal Nippon are largely unaffected by the rise in raw material cost, but are getting the benefits of the resultant rise in steel prices. It is largely the small secondary steel players that have witnessed huge losses because of a steep rise in iron ore prices. The secondary steel units contribute 50 per cent of steel production in India.

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