Indian iron ore pellet offers soften further amid weak demand in China, concerns over imposition of export tax

Friday, 16 August 2019 13:45:45 (GMT+3)   |   Kolkata

Indian iron ore pellet export activity has continued to remain muted despite the further sharp fall in offers, while sentiment among pellet manufacturers has become gloomy in reaction to attempts to get export tax imposed on pellet shipments, traders said on Friday, August 16.

According to traders, offers have been reduced during the past week by pellet producers in the eastern region of Odisha and in Raipur in central India by around $10/mt to the range of $122-125/mt CFR China, but buyers have not responded and transactions of only minor volumes have been reported.

The traders said that the sharp fall in pellet offers and the lack of buying interest are a direct response to the softening of seaborne cargoes of high grade ex-Brazil and ex-Australia iron ore fines during the past week and Chinese steel mills’ reduced consumption of pellets, and hence the overall depressed market conditions.

Sentiments among Indian pellet manufacturers have taken a hit amid news that a domestic iron ore miner has started lobbying the government seeking imposition of an export tax on overseas shipments of pellets, which at present are subject to zero duty.

Commercial miners, the major suppliers of raw material to pellet plants which do not have captive mines of their own, have sought imposition of a 30 percent export tax in line with the present levy on exports of iron ore lumps and fines with Fe content of 58 percent and above, and India’s Ministry of Mines is reportedly taking a positive stance on the request.

According to an official at the Pellet Manufacturers’ Association of India (PMAI), domestic pellets plants with an aggregate capacity of 83 million mt per year are operating at less than 80 percent capacity utilization and the imposition of an export tax would be a crippling blow to Indian pellet exports, which was recorded at 9.3 million mt in 2018-2019.

The official said that, even as most overseas buyers - particularly traders representing Chinese steel mills - revert to their original preference for high-grade low alumina-content Brazilian and Australian iron ore lumps and fines, the imposition of an export tax would completely price Indian pellets out of the overseas markets.

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