Indian Iron Ore Export Tax May Deter China
By Interfax-China
15 Jan 2008 at 08:21 AM GMT-05:00
resourceinvestor.com
SHANGHAI (Interfax-China) -- The Indian Ministry of Steel's proposed 10% to 15% tax on iron ore exports will further push China to source iron ore for production from elsewhere, an industry analyst told Interfax today.
"India is currently the third-largest iron ore supplier to China. However, the proportion of imports made up by Indian ore has been dropping since last year, when India imposed the previous iron ore export tax," Yu Liangui, an analyst with Mysteel, said. "This has made China seek out other sources, which it will do with more vigour if India further stiffens its taxes."
Iron ore from India accounted for 20.3% of China's total iron ore imports for the first 11 months of 2007, down from 22.9% in 2006. For the month of November, 2007, India was the source of 16% of China's iron ore imports.
"The growth rate of Indian iron ore imports also fell from its usual level of around 20% to about 5% for 2007, which also indicated that the Indian current export tax policy is taking effect," said Yu. "China, the world’s largest iron ore consumer, has been taking pains to increase iron ore imports from further afield. A proposed iron ore export tax of 10% to 15% based on prices would give Chinese steel mills an even harder time. In the meantime, Indian miners stand to suffer from a rise in export tax, as currently 80% of India's iron ore exports go to China," Yu said.
India's Ministry of Steel submitted pre-budget recommendations to the Indian Finance Ministry last week. The proposed duty would be based on current FOB prices, replacing a system of fixing specific rates on every tonne shipped out of the country. The budget is expected to be completed on 29 February, Indian business paper Mint reported on 2 January.
According to today's Mint, the Federation of Indian Mineral Industries (FIMI) called on the Indian Prime Minister, Manmohan Singh, to withdraw the proposed export duty. FIMI said the new tax, which is based on FOB price, would be detrimental to the iron ore industry. FIMI said increasing costs since the imposition of the tax in India last year had impacted ore exports, though this had been offset in part by the rise in export prices. FIMI said exports to China are dropping due to the rise in mining and logistics costs in India.
"The Indian government is bound to introduce in new export tax policies to reserve iron ore resources for domestic steel industry development and to gain profit while at the same time lower export volumes," said Yu.
Manmohan Singh began his first official visit to China on Sunday. The two countries agreed to set a bilateral trade target of $60 billion by the year 2010.
Last March, the Indian government introduced ore-grade specific export taxes of Rs 50 ($1.27) to Rs 300 ($7.64) per tonne, representing the first move by the Indian government to conserve iron ore. However, iron ore prices surged over the year, with FOB prices of grade 63.5% Indian iron ore reaching $135 to $140 per tonne at the end of December 2007, up 146% from the per-tonne-price of $57 at the beginning of 2007.
During his speech in Beijing yesterday, Manmohan Singh addressed the challenge of diversifying India’s exports to China to bridge the rising trade deficit between the two countries. China’s major imports from India include iron ore, jewels and vegetable oil.
© Interfax-China 2007. For more intelligence on Chinese metals and mining, contact David Harman in Hong Kong at david.harman@interfax-news.com or (852) 2537-2262. |
