In a setback to the Indian iron ore miners, although after a long drawn battle between steel and mining ministry, the Indian commerce ministry last week has raised the export duty on iron ore to 30% on both fines and lumps effective January 1st 2012
Various reactions came from the market players. While the miners are predicting severe dip in export volumes, steel makers are happy that the availability in the domestic market would increase leading to possible reduction in prices.
As the duty was previously 20%, the increase amounts to 10%, which translates to additional cost of about USD 13 per tonne or INR 690 per tonne to USD 5 per tonne to INR 265 per tonne for various grades of iron ore considering the prevailing FOB prices for 63.5%/63% and 50%/49%.
As the hike in export tax by 10% has to be absorbed by the miner in current global market scenario of plenty, its effect on the export volumes remains hazy as the dip in Indian exports is primarily due to clamp down on issues related to illegal mining rather than viability.
Moreover, the devaluation of Indian rupee for 43 to 53 to USD on last few months has increased exporter’s earning by more than 20% as compared to the earlier times when they were paying 20% export tax. Thus theoretically speaking, even Indian miners are not really affected by 10% hike in export tax except that the extra margin due to devaluation has been reduced.
Iron ore fines
FOB India
| Grade | Change |
| Fe 63.5/63% | 0% |
| Fe 63.5/62.5% | 0% |
| Fe 63/62% | 0% |
| Fe 62/61% | 0% |
| Fe 61/60% | 0% |
| Fe 60/59 % | 0% |
| Fe 59/58 % | 0% |
| Fe 58/57% | 0% |
| Fe 57/56 % | 0% |
| Fe 56/55% | 0% |
| Fe 55/54 % | 0% |
| Fe 54/ 53 % | 0% |
| Fe 53/52 % | 0% |
| Fe 52/51 % | 0% |
| Fe 51/50% | 0% |
Change is on Jan 6th 2012 as compared to 30th Dec 2011
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