Steel Mills Raise Voice over Surging Iron Ore Exports, Call for Ban

The Indian steel industry is grappling with challenges as smaller steelmakers advocate for a ban on iron ore exports, following a substantial increase in exports, with the primary buyer being Chinese mills – the world’s leading steel producer.

This surge in Iron ore exports has led to inflated domestic prices in India, causing distress in specific sectors of the Indian steel market.

A Surge in Indian Iron Ore and Pellet Exports

• In 2023, Indian iron ore (Fines/Lumps) exports experienced a staggering increase to around 33.1 million tons, compared to 8.5 million tons in 2022. A significant portion of this export is directed towards China.

• Overall, raw material exports (Pellet/Concentrate and Iron ore) from India in 2023 reached about 44 million tons, a substantial increase from the 16 million tons recorded in 2022.

• The total exports of pellet/concentrate and iron ore in 2023 also reached a three-year high, surpassing the previous record set in 2020, with approximately 54 million tons.

The rise in exports occurs at a time when domestic demand for iron ore is rising within India, increasing the concerns of local steel manufacturers.

Government Intervention to Protect Domestic Steel Industry

Sponge Iron Associations in the country voiced the concerns of smaller mills, emphasizing the need for a ban on iron ore exports to protect the domestic steel industry. According to industry leaders, smaller mills in major manufacturing states have united to lobby the steel ministry. They are demanding government intervention to sustain their operations.

Steel Industry Challenges and Margins

India’s second-tier (Mid-sized) steel plants, constituting 40-45% of the country’s output, are bearing nearly four times higher input costs compared to larger (tier-one) steel mills. The disparity arises from the latter’s ability to negotiate better prices for inputs like iron ore and coal. Often it also happens due to possessing their own mines. This financial strain has turned many second-tier steel producers into loss-making entities, necessitating government action.

Impact on Iron Ore Prices

The possibility of India imposing restrictions on iron ore exports raises concerns about the impact on iron ore prices. Iron ore is an important raw material for making steel, and any move by India to limit exports could further disrupt the global market. The government’s past interventions, such as the 50% export tax imposed in May 2022 (later withdrawn), highlight its commitment to safeguarding the interests of local steel producers.

Government Response to Iron Ore Export Ban

As of now, the Indian steel ministry has not responded to the industry’s plea for an export ban. The industry awaits clarity on whether the government will take measures to address the concerns raised by smaller steelmakers or not. The outcome will not only impact the domestic steel market but also have drastic changes in the global iron ore trade.

Outlook for the Steel Industry

The expansion of capacity among India’s major steelmakers has fueled local demand, increasing the competition for iron ore. However, soft end-user demand for steel, along with the inability of smaller producers to compete with larger mills, has created a challenging environment for the industry.

If the government responds favorably to the recent demand by Indian producers to ban iron ore exports, it will have a drastic impact on the industry. If exports are banned, the industry’s margins and capacity utilization will boost. This will further directly impact end-users as steel prices will be maintained with cost-effective raw materials.

Apart from the impact on the domestic market, the cost-effective production of steel can also be competitive in the global market. There will be scope for an increase in steel exports from India to compete with Chinese mills.