The increase in iron ore export taxes announced by the Indian government over the weekend will result in large surpluses at home, primarily affecting producers of low-grade ores who rely on international markets, according to a mining industry body on Monday.
The government announced on Saturday that export tariffs on new iron ores and concentrates would be raised to 50% from 30% on Sunday, and pellet duties would be increased to 45 percent from zero. Import tariffs on coking coal and coke were also removed by the government.
Because India is one of their major non-mainstream iron ore suppliers, benchmark iron ore futures in China – the world’s top consumer of the ore – rose about 7% in early trade on Monday, marking their biggest daily gain in two-and-a-half months.
“This is actually self-defeating because there will be a lot of stockpiling,” R.K. Sharma, secretary-general of the Federation of Indian Mineral Industries (FIMI), said, adding that Indian ore exports to China were also declining due to low grade quality.
Supply-chain snags and pandemic-induced labour shortages have disrupted production at global miners such as BHP, Rio Tinto, and Fortescue Metals Group in Australia, while Brazil’s Vale has also faced difficulties.
India, the third-largest economy in South Asia, also increased export taxes by 15% on eight steel intermediates and eliminated import duties on coking coal, which has been driving up steel prices due to shortages. The new export duty on steel products, India’s top steelmakers body warned on Monday, will “adversely impact” mills that have been aiming to boost exports and expand global market share in the aftermath of Russia’s invasion of Ukraine. In the fiscal year that ended in March, the world’s second-largest crude steel producer produced a record 120 million tonnes. “The latest policy will put a damper on new investments,” said DilipOommen, CEO of ArcelorMittal Nippon SteelIndia Ltd (AM/NS India) and president of the Indian Steel Association. AM/NS India, a joint venture between ArcelorMittal and Nippon Steel, believes the decision to raise the steel export tax will have a negative impact on the company’s 90,000 tonnes of steel exports per month, according to Oommen. Separately, Kaustubh Chaubal, vice-president of Moody’s Investors Service’s corporate finance group, said the increased export duty would raise costs for domestic steel mills.