India's iron ore output and exports will fall by a quarter this fiscal year, hit by a crackdown on illegal mining and the ban on exports by the southern Karnataka state, the head of a trade body told Reuters. Exports in the year to March 2011 from the world's third-largest supplier are expected to drop 25-30 percent, Siddharth Rungta, president of the Federation of Indian Mineral Industries (FIMI), said on Tuesday.
Iron ore production will fall 22.5 percent to 175 million tonnes from 226 million tonnes last year, he added. Karnataka, the second-largest iron ore producing state in India, banned exports of the commodity from 10 ports in July, and Chief Minister B.S. Yeddyurappa told Reuters in an interview in August he wanted to conserve the raw material for steel firms such as ArcelorMittal, which plans to invest in the state.
Iron ore exporters say the government's move to raise the export tax on iron ore exports also hurts trade. "There will be a fall in exports presuming the order of Karnataka continues, there is no reduction in railway freight and export duty is also not rolled back," Rungta said. He said the ban in Karnataka was the key factor hitting exports.
"We don't know what is going to be the fate of the Karnataka order; 25 million tonnes will be the setback from Karnataka alone," he added. Most of India's exports land in China, which houses the world's largest steel industry. India's steel industry has been asking for a ban on iron ore exports, or a phased reduction as it says more of the steel-making ingredient should be preserved for local use.
The Indian government has said it will probe illegal mining to catch people operating without necessary licences and approvals. Spot prices of foreign ores in China with 63.5 percent iron content have averaged $150 a tonne with freight this year, peaking in April at around $196.
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