The Hindu Business Line : Iron ore exports from Karnataka decline 50%

Major hurdles
China, which accounts for 95% of the State’s iron ore exports, is exercising prudence as a major buyer.
The mining sector is characterised by a number of small players competing among themselves.
Lack of port handling facilities hits volumes.

Shamik Paul

Bangalore, June 30 Iron ore and mineral exports from Karnataka fell by about 50 per cent in 2008-09 owing to the 60 per cent drop in global market prices since September 2008.

For the period April-February 2008-09, Karnataka’s iron ore and minerals export (including granite) amounted to Rs 5,016.1 crore.

In 2007-08, export earnings from the sector were Rs 10,197 crore. The drop in export earnings was almost entirely on account of price, as volumes were unchanged.

China stock pile-up

Industry experts said there was unlikely to be any improvement in prices in the near future. This is because China, which accounts for 95 per cent of the State’s iron ore exports, had stacked up large quantities of iron ore.

It is expected to source a larger proportion of its supplies from Australia and Brazil. Australia accounts for 40 per cent of China’s iron ore imports, while Brazil and India make up 25 per cent and 20 per cent respectively.

At present, China is exercising prudence as a major iron ore buyer.

“From about $120-$130 a tonne, prices have fallen to an average of $40-$45 per tonne,” said Mr Basant Poddar, Vice-Chairman, Federation of Indian Mineral Industries (South). “At present, it is about $50-$55 a tonne,” he said.

The decline in prices began since September and continued till the end of 2008-09.

However, there has not been any significant decline in volumes.

Mr Poddar ruled out an immediate recovery in prices. Iron ore exports from Karnataka rose from Rs 691.56 crore in 2001-02, when it was 3.4 per cent of the State’s total exports, to Rs 10,197 crore in 2007-08, constituting 7.7 per cent of the total exports.

The growth of iron ore exports tapered off before the onset of the global economic crisis. While iron ore exports rose by 54.6 per cent in 2002-03, 27.2 per cent in 2003-04, 53.2 per cent in 2004-05, 24.3 per cent in 2005-06, 32.7 per cent in 2006-07, this fell to 13.8 per cent in 2008-09.

Port handling facilities

The State’s mining sector is characterised by a number of small players, with intense competition among themselves. .

The absence of adequate port handling facilities at Mangalore, Goa, Ennore and Karwar has also hampered export volumes, Mr Poddar said.

According to experts, the clash of interests between the mining and steel industry has also contributed to a policy deadlock.

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