Commodities Research Unit & ASSOCHAM have jointly predicted that iron ore exports from India would decrease modestly till 2013 and accelerate thereafter since such exports have already reached their peak in 2009-10 in which iron ore exports were estimated at 115 million tones. However, over 3/4th of the iron ore exports in last fiscal were consigned towards China.
Releasing findings of the CRU & ASSOCHAM on Indian Steel Industry An Overview’, Dr Swati Piramal president of ASSOCHAM said that iron ore exports have reached their peak in 2009 and will struggle to achieve any growth going forward.
This is mostly on account of rising domestic demand and will be further accentuated if government imposes severe restrictions on iron ore exports such as the ones demanded by Indian steel industry. India’s current export tax stands at 5 per cent for fines and 15 per cent for lumps. Even elsewhere in the world, mineral companies are finding it harder to export due to their increasing domestic demands and so will remain the case with India. Even China has a high export tax rate for its natural resources such as coke, coking coal and there have been talks in Brazil as well to impose higher export taxes, especially on iron ore.
In India, recently Karnataka has banned all iron ore exports from the province due to compulsions for meeting domestic requirements and it is in view of this background that CRU and ASSOCHAM expect that iron ore exports from India would continue to decrease in another three years and accelerate thereafter because by than most of capacities increase in steel sector will have been achieved. This will have obvious implications of reducing India’s share in the sea-borne market.
In 2009-10, total iron ore production in India stood at 205 million tones, out of which fines were 130 million tones, lumps at 59 million tones and rest as pellets. The iron ore production is through a large number of smaller mines whereas bigger ones are only few, run by public sectors, large private sectors and government undertakings.
The paper on Outlook for Steel Consuming Sectors in India, however, points out that it is increasingly focusing on investments in infrastructure. Besides, there is growth participation from private sector to tap growing consumer demand from auto and housing sectors. Since, all these sectors account for a major share in steel consumption in the country, steel demand in India is all set to witness a significant growth.
The paper projects that infrastructure is expected to grow at a CAGR in the next five year plan 2012-17, government has doubled allocations to infrastructure at USD 1025 trillion which will have major consumption from steel sector.
In addition to auto sector, the real estate sector will also consume significant quantities of steel, especially in the next 3 to 4 years since there is a shortage of 25 million housing units and another 80-90 million housing units will have to be constructed mainly, catering to low and middle income groups. Over the period till 2013, it is expected that the real estate sector may attract a total of USD 12.1 billion and is expected to grow at CAGR of 11%.