New Delhi - Demand for Indian iron ore in China may slip away slowly and gradually, R K Sharma, secretary general of Federation of Indian Mineral Industries said Monday.
Indian iron ore exports fell sharply by 44% to 3.1 million metric tons after a 22.9% drop in August to 4.2 million tons, data from Federation of Indian Mineral Industries showed.
"Stockpiles and slowdown in demand can give the Chinese a chance to flex muscles," Sharma said.
A fall in freight rates since June and increase in export taxes have made Indian ore costlier than Brazilian ore. While spot prices of Indian iron ore have fallen by about 45%, and there are still no buyers.
Exports in April-September fell by about 5% to 37.9 million metric tons compared with 39.8 million metric tons a year earlier, the data showed.
India recorded a huge jump in iron ore exports in April of 37.2% to 11.5 million tons, but exports have slipped since May.
The country exported 104 million tons of iron ore in fiscal 2007-08, mostly to China, the single-biggest market for the country's medium-grade iron ore.
China is expected to import 430 million tons of iron ore in 2008, up from 383 million tons imported last year.
"India has been a swing supplier in the Chinese market meeting supply shortfalls of Australian and Brazilian ore," Sharma said.
As demand has dropped, India now expects to export about 70 million tons to 80 million metric tons of ore in the current financial year to March 31, 2009.
Spot Prices May Fall Below Long-Term Prices
Spot iron prices, which sold at a premium to the long-term prices before the Olympics in China, may slip below the long-term prices, industry experts said.
"Indian ore spot market rates were $1-$2 a ton lower than the Brazilian ore before the Olympics," Sharma said. "There is no spot market for Indian ore now as China has cut down on imports."
Indian ore exported from the eastern coast is about $70/ton free-on-board while western coast prices are about $80/ton.
Earlier this year, Indian ore prices peaked to $145/ton.
If the export crunch continues, there may be a lot of mine closures, Sharma said. "The moot question is whether infrastructure expansion will continue at the same pace in China?"