While the logistics cost for steel plants located on coastal areas rose, steel players shifted to imports for sourcing their key raw material, instead of buying at inflated domestic prices.
Mumbai: Despite being the fourth largest producer of iron ore, India's imports of mineral rose a whopping 157 percent during April-December 2018 mainly due to higher logistics costs for sourcing it domestically and lower import duties, says a report.
Out of the total imports of 11.75 million tonnes in 9MFY19, which was a 157 percent rise as compared to a year ago, Australia's share was highest at 57 percent, which has more than tripled compared with corresponding period last year, domestic rating agency CARE Ratings said.
The other countries from which India imports iron ore and its shares are South Africa (19 percent), Brazil (15 percent) and Bahrain (5 percent).
In July 2018 alone, imports peaked at 1.93 million tonnes, the highest in any month in the past five years, the agency said in its report.
"Surge in imports can be attributed to varying ore grades in multiple iron ore producing states, which leads to price differences. While the logistics cost for steel plants located on coastal areas rose, steel players shifted to imports for sourcing their key raw material, instead of buying at inflated domestic prices," it said.
In addition to this, a significantly low import duty of 2.5 percent encouraged iron ore imports in the country, it said.
The country, however, witnessed a decline in imports from August 2018, mainly due to the strengthening of US dollar, which reduced spreads between landed cost and domestic prices of iron ore, making imports less preferred by Indian steel makers during the period.
India's exports, on the other hand, declined 32 percent to 12.7 million tonnes between April 2018-January 2019, compared with a fall of 17 percent in the same period last fiscal.
China was the principal iron ore importer from India with 74 percent share or 9.4 million tonnes, followed by Japan, South Korea, Oman and Malaysia.
Export duty in India for iron ore is high at 30 percent currently. The agency noted that iron ore pellets exports to China have also declined 18 percent in 9 month period of FY19, compared with corresponding period last year.
"Uncertainty of winter output cuts in China and slow inquiries from non-Chinese market resulted in a drop in pellet exports from India," it said.
The agency further noted that domestic iron ore demand will be dependent on domestic steel demand, which has seen strong growth during the year.
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