India is likely to remain a net importer of iron ore in 2015-16 as falling international prices might encourage steel majors to continue importing the key raw material.

The quantity imported might not be as high as in the last financial year. However, with an expected increase in domestic production of iron ore.

In 2014-15, India imported 15 million tonnes of iron ore, an all-time high. Exports were a meagre 4.5 million tonnes.

This year, the country’s imports will again far exceed exports.

During this year, imports are likely to be around 10 million tonnes despite the reopening of mines in Odisha and the huge pile-ups in several places. However, the downward trend of international prices will keep importers interested in the global seaborne trade. CFR China would be below $50 per tonne.

Also, inconsistency in the supply of iron ore and availability of high-grade ore at cheap prices will be encouraging for the steel mills to keep their import intact.

Indian steel mills, which do not have captive mines, require around 95 million tonnes of iron ore per annum.

JSW Steel, which was the largest importer last year at 10 million tonnes, will continue to be the major importer in FY16. Other importers include Tata Steel and Welspun.

“This year, we are going to increase our capacity utilisation above 90 per cent. Though the availability of domestic iron ore will improve during the year, we will continue to import to meet the requirement at our plants. However, we may not import as much as last year and might end up at around 6 million tonnes from South Africa,” Vinod Nowal, deputy managing director, JSW Steel, said.

Tata Steel, which imported around two million tonnes last year, is expected to import this year, too, to feed its Kalinganagar steel plant, which will be operational, analysts tracking the sector said.

Last year, imports took place at $70-90 per tonne and this year, prices are hovering around $50 per tonne, which is a good enough reason for the mills to import iron ore containing very high grades, Nowal added.

He, however, said price correction carried out by NMDC last week was not enough. Instead of the reduction of Rs 500 per tonne in prices of fines, they should have reduced by at least Rs 1,000 per tonne, he said.

“The recent correction of Rs 500 per tonne in domestic prices of iron ore fines by NMDC is welcome. However, more downward correction in ore prices are required to ensure imports are totally avoided. We need to continuously evaluate this domestic pricing aspect of iron ore fines vis-a-vis import offers in view of continued pressure on global steel pricing as well,” H Shivaramkrishnan, chief commercial officer, Essar Steel, said.

The production of domestic iron ore is pegged at 137-140 million tonnes for 2014-15. For the current financial year, a growth of 15 per cent is expected. The growth will come from NMDC and mines in Karnataka and Odisha.

Recently, the Rungta mines received environmental clearance for 16.5 million tonnes in Odisha. NMDC has announced it would increase production by 20 per cent to 35 million tonnes, as against 31 million tonnes in FY15.

In Karnataka, production is set to increase by over 20 per cent to 22 million tonnes in 2015-16. Goa is also likely to commence production towards the second half of this year.

"With the current prices in international market, there will be no scope for Goan miners to export. Moreover, the prevailing 30 per cent export duty on iron ore and differential freight tariff charged by the railway will not encourage exports," an analyst said.

Source:- business-standard.com