Indian iron ore exports to China slumped by about 20% in September 2008 on account of the credit crisis in China and ample stocks of ore in the country.
The Indian iron ore exports to China declined nearly 26% to slightly over 3 Million Tonnes in September 2008, as reported by The Economic Times.
This year, India is likely to export about 80 Million Tonnes of iron ore, low from 100 Million Tonnes of low-grade iron ore and fines exported in 2007. Out of 100 Million Tonnes, more than half of the exports were made to China.
Further, in the past few weeks, spot sales have also gone down considerably. For iron ore fines, spot prices have declined from $150 per Ton to $70-$80 per Ton. Moreover, about 30 Million Tonnes of iron ore is reported to have stuck in various ports of India.
The primary reason for the decline in iron ore export from India to China is the credit crisis prevailing in China. Due to the crisis, industrial sectors are facing difficulties in getting credit and consequently, the infrastructure growth has got affected adversely. Thus, the demand of iron in the country has declined. Also, after 2008 Olympics, the steel demand has dropped dramatically in China. Abundant stocks also impacted the demand of iron ore in the country.
Keeping in view the steep slowdown in country’s economy, the government of China is also feeling reluctant to increase its ore consumption. Additionally, downfall in rates of ocean freights has also brought down the demand of lower quality iron ore export from India as now China can get better quality iron ore in reduced prices due to fall in freight rates globally.
The decline in iron ore export to China is being considered as a big loss for India. So, in order to compensate for it, the prices of Indian ore should be made more competitive. Also, in order to tackle the situation and boost the exports of iron ore, the Indian iron ore industry has appealed the government to eliminate the 15% export duty.
According to a Research Analyst at RNCOS, “The adverse business conditions in China are hampering the iron ore export from India. As a result, the foreign exchange from China would decline. Since China is among the leading iron ore export market for India, the decline in ore export will affect the Indian economy negatively.”
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