India’s rocketing iron ore imports

India's rocketing iron ore importsA late charge in the iron ore price last year appears to be fizzling out with benchmark Chinese import price easing to $70.90 a tonne on Wednesday.

The price of the steelmaking commodity hit a more than five year low of $65.60 on December 23.

Most of the blame for the decline has been laid at the door of Australian and Brazilian producers ramping up production and weakening demand in top consumer China.

But at least one source of supply is vanishing and could further into the future provide a boost for iron ore miners desperate for new markets.

Prakash Duvvuri, head of research and business development at OreTeam, a Delhi-based consultancy tells Indian iron ore imports hit a record-high last year.

India’s steel producers imported more than 8 million tonnes in 2014, turning the sub-continent into a net importer. Imports were a mere 1.2 million tonne in 2013 and 3.1 million tonnes last year.

While these numbers are negligible compared to Chinese imports which also grew to a record in 2014 above 900 million tonnes, only five years ago Indian exported roughly 120 million tonnes per year – mostly to China.

The collapse in exports came amid a government crackdown commencing in 2010 to root out corruption, environmental degradation and transform an industry thoroughly in need of modernization. The shuttered mines in Goa and Karnataka are now slowly coming back on stream.

Duvvuri believes in 2015 green and brown field projects coming on stream will boost India’s steel production by roughly 5%–6%, adding that “issues surrounding cheaper and inferior steel imports may resolve due to higher taxes and anti-dumping duties.”

India’s steel ministry announced in December that state owned mining company National Mineral Development Corp will raise its iron ore output to over 75 million tonnes per annum by the 2018-2019 financial year. The target for 2020-2021 is more than 100 million tonnes per year.

That’s up from only 30 million in the current year. The production surge is required to push the India’s steel production rate to a long term target of 300 million tonnes by 2025, compared to 83 million tonnes today.

That would require production of 500 million tonnes of iron ore annually.

India is definitely a long-term play, hopes are high inside the country that Prime Minister Narendra Modi, an economic reformer elected last year to lead the country’s first majority government in decades, could kickstart the economy and emulate China’s success.

Image of a small-scale mine in Jharkand by lecercle