Iron ore supply agreements with Korea and Japan have existed for around six decades, renewed uninterruptedly as New Delhi’s goodwill gesture to the two Asian countries.
Even as the government chose not to renew decades-old long-term agreements (LTAs) for supplying iron ore to Japanese steel mills and South Korean major Posco upon their March expiry, state-run miner NMDC, which used to deliver the ore, said it would continue to export to Japan provided it proved to be economically viable.
“For the current fiscal, the government will not be providing the export duty relief it was provided earlier. But there is no bar on us to export iron ore. The only thing is that we have to pay 30% export duty like others and not 10% as earlier. We are indeed looking for exports,” NMDC’s chairman-cum-managing director Sumit Deb told FE.
First, NMDC will look at Japan as its export destination because it has a certain comfort level with the Japanese mills. Subsequently, however, the company would also look at the feasibility of exporting to South Korea and other destinations, Deb said.
Iron ore supply agreements with Korea and Japan have existed for around six decades, renewed uninterruptedly as New Delhi’s goodwill gesture to the two Asian countries. The union cabinet last renewed the contract on April 25, 2018; the agreement was effective till March 31, 2021.
The government did not renew LTAs, apparently given the uncertainty over investment plans of steel mills from these countries in India. Shortage of the critical raw material for steel-making in India is also a reason for the decision.
In 2019-20, NMDC exported 2.44 million tonnes (MT) of iron ore, but it came down by around 6% to approximately 2.3 (MT) in 2020-21. There have been no exports so far in the current fiscal. However, for 2020-21, NMDC has set a 2-2.5 MT export target.
NMDC operates mines in Chhattisgarh and Karnataka, but the latter does not permit exports at the moment. As a result, NMDC will have to export from its Chhattisgarh mines.
“There is no problem for us to export from Chhattisgarh. But we have taken at the financial viability of the exports and see whether it does make sense after paying 30% export duty,” Deb said.
NMDC is expected to produce around 44 MT iron ore in the current fiscal, up from 33.25 MT in 2020-21. The additional production is set to come from its Karnataka mines, which have been closed for over three years until February this year. The mine has an annualized capacity of 7 MT per annum. It has set a 42 MT sales target, up from 34.15 MT in the last fiscal.
