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Chinese steelmakers shiver, Indian miners catch flu

business Updated: Oct 29, 2008 21:49 IST
Sumant Banerji
Sumant Banerji
Hindustan Times
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A never-before stagnation in the Chinese steel industry coupled with crumbling global economy is giving sleepless nights to domestic miners. Iron ore exports, which had grown by over 11 per cent last year — largely due to strong demand from China, has declined by 5 per cent in the first six months of this fiscal. With the metal cycle reversing and China looking to cut steel production, exports are likely to tumble further, it is feared.

India exported 104.27 million tonnes of iron ore in 2007-08, 88 per cent of which went to China alone. Imposition of an export duty earlier this year alongwith a general decline in the Chinese steel industry which is facing the spectre of a production cut for the first time since its liberalisation, has seen exports go down to 37.92 mt in April-September 2008 against 39.78 mt last year.

"It is a typical case of government killing a flourishing trade. We have entered into a recessionary cycle and in the short and medium term there is no hope," said R K Sharma, Secretary General Federation of Indian Mineral Industries (FIMI).

The decline in exports have coincided with falling prices of iron ore and steel in the international market. Prices of medium grade iron ore have fallen by over 50 per cent from $ 143 per tonne in June 2008 to $ 60 per tonne in October.

Similarly price of hot rolled coils (steel) has gone down by 36 per cent from $ 1100 in July to $ 700 in October.

"Prices of iron ore have fallen drastically and out profitability is now negligible," said Rahul Baldota, executive director, MSPL. "It is early to say if we are in a recession but there is no take off happening and inventory is at an all time high."