Smaller steelmakers in India are advocating for a prohibition on the export of iron ore due to a surge in sales to Chinese mills, which has led to a rise in local prices.
Last year, Indian exports of iron ore surged by 170% to 44 million tons, with the majority being shipped to China, coinciding with a period of increasing domestic demand for the raw material. Consequently, the most adversely affected segments of the industry are urging authorities to impose restrictions to safeguard their profit margins.
Anil Nachrani, president of the Chhattisgarh Sponge Iron Manufacturers Association, emphasized the need for the government to halt all forms of iron ore exports, warning that failure to do so would jeopardize India’s steel industry. Nachrani highlighted the need for India to transition from being an exporter of iron ore to becoming a steel exporter.
According to Nachrani, smaller mills in at least five major manufacturing states have united to lobby the steel ministry for action, as many are facing losses. Second-tier producers, constituting approximately 40% of the country’s output, are reportedly paying nearly four times more than larger operations for raw materials. Larger steel mills in India often benefit from negotiating better prices for inputs like iron ore and coal, and some even have their own mines.
Any potential restriction imposed by India on iron ore exports could provide support to iron ore prices, which have been among the weakest-performing commodities this year. In the past, the government has intervened to protect the interests of local producers, as evidenced by the imposition of a 50% export tax on all grades of iron ore in May 2022, which was subsequently revoked six months later.
As of now, the steel ministry of India has not responded to requests for comment on this matter.
The expansion of capacity at India’s major steelmakers has heightened competition for iron ore in both auctions and the open market, further intensifying the challenges faced by smaller players. However, soft demand for steel from end-users has added pressure on margins for these smaller producers.
Deependra Kashiva, director general of the Sponge Iron Manufacturers Association, noted the dual challenges of weak demand and the inability of smaller producers to compete with major players who possess captive coal and iron ore mines.
