Go to List

India: NMDC export contracts to Japan, Korea scrapped as GoI withdraws sops

Government-owned miner NMDC’s long-term iron ore export contracts with Japanese steel mills (JSMs) and South Korea’s POSCO will not be renewed, SteelM...

Fines/Lumps
By
1746 Reads
16 Jun 2021, 15:55 IST
India: NMDC export contracts to Japan, Korea scrapped as GoI withdraws sops

Government-owned miner NMDC's long-term iron ore export contracts with Japanese steel mills (JSMs) and South Korea's POSCO will not be renewed, SteelMint has learnt from reliable market sources.

The reason is that the Government of India has withdrawn the two sops it had provided NMDC in offering these contracts. These comprised a reduced 10% export duty as against the normal 30% paid by private iron ore exporters, and some railway freight concessions compared to private players.

The source said: "NMDC has not 'banned' exports. But, these contracts were on special terms given to it by GoI for years but which have now been withdrawn. So, there is no contract now actually and no need for renewal. Any other player can enter and negotiate their terms with the government."

No impact on financials

It may be recalled that NMDC had long-term agreements (LTAs) for export of iron ore (lumps and fines) of grade Fe64%+ to JSMs and POSCO, which were to be renewed on 31 Mar'21. However, they were not renewed, fuelling speculations. These had been last approved for renewal in 2018 from 1 Apr'18 till 31 Mar'21 by the Union Cabinet. The canalising agent for this particular grade of iron ore was MMTC.

NMDC exported Fe 65% to JSMs and POSCO combined with an upper limit of 3 million tonnes (mn t). However, SteelMint learnt the volume usually ranged from 2.5 to 3 mn t.

The source also informed that scrapping of these LTAs will not impact NMDC's financials since "its domestic market is good".

Odisha scarcity a reason?

Other sources informed that tight iron ore availability in Odisha were also an important reason behind the government's withdrawal of the said sops. SteelMint heard that trade circles had raised queries as to why was NMDC exporting its high grade ore when there were availability concerns at home. The shortage has been aggravated by the expiry of two mines of Sarda and Essel Mining coming up in Aug'21.

Low-grade ore export opportunities?

NMDC, meanwhile, will auction the low-grade ore slimes (Fe 57-58%) lying for years at its Bacheli mines in Chhattisgarh. Over 1 lakh tonnes will be auctioned on 23 Jun'21. "NMDC has not specified if these auctions are meant for exports or domestic market but this is a good opportunity to export the low-grade ore when international prices are high," observed a source.

As per SteelMint data, NMDC's iron ore exports were at 2.25 mn t in FY'21, an almost 9% drop year-on-year (y-o-y) from 2.47mn t in FY'20.

-Madhumita Mookerji

 

16 Jun 2021, 15:55 IST

 

 

You have 0 complimentary insights remaining! Stay informed with SteelMint
;