All India Induction Furnace Association (Aiifa) has urged the Indian government to either ban exports or impose 30pc duty on exports of raw iron ore pellets, according to a letter sent to the Prime Minister Narendra Modi. The association states such a move would save the secondary steel sector from dire circumstances since the COVID-19 has substantially hit the economy.
At present, a significant volume of raw pellets has dried out the supply for domestic producers. The supply crunch has increased the prices of raw iron ore pellets by 50pc from Rs5,300/mt to Rs8,200/mt in recent days. Thus, the country has to imports finished steel from overseas markets.
Aiifa also points out, should the prices for raw pellets increase by another Rs3,000/mt, it would push finished steel prices in the country to around Rs6,000/mt. The current market fundamentals are not in a position to absorb such a raise. The increase could render several downstream industries uncompetitive pushing them towards heavy financial losses.
Adding to their woes is also the fact that international iron ore prices have hit a six-year high amid short supply and increased input costs for miners.
Thus, the Federation of Indian Mineral Industries (FIMI), Southern Region, has already requested the Karnataka government to allow sales outside the state and rectify the imbalance. The estimated losses that could arise over the next 10 years due to Karnataka’s export ban are Rs290.59bn.
As per the data, India exported 10.34mn mt of fines and 1.16mn mt of lumps in 2019 produced in various Indian states barring Karnataka. The domestic market had a surplus of 5.19mn mt fines, mainly due to production from auctioned C-category leases.
End-user demand still weak
Domestic finished steel demand in the country is yet to improve. Heavy monsoon has put many construction projects on hold. COVID-19 outbreak also is yet to come under control in the country. The situation is likely to turn in the fourth quarter beginning January 2021, with construction and infrastructure projects announced by the government picking up.