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LATEST NEWS UPDATES | Days of excessive profits are over-Ajay Dsouza </title>
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New, more fair and transparent norms for iron ore mining are now being put in place in many States
Hit by debilitating mining curbs (including an outright ban in some States) and a clampdown on exports through high duties, India’s..."/>
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New, more fair and transparent norms for iron ore mining are now being put in place in many States
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<h1 class="cat-box-title">Days of excessive profits are over-Ajay Dsouza</h1>
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Published on</span><span class="text-date"> Mar 11, 2013</span>
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<div align="justify">-The Hindu<br /><br /><em>New, more fair and transparent norms for iron ore mining are now being put in place in many States<br /></em><br />Hit by debilitating mining curbs (including an outright ban in some States) and a clampdown on exports through high duties, India’s iron ore industry today is a pale shadow of what it was for much of the last decade, despite some recent forward movement on restarting iron ore mining in Karnataka, one of the key producer States.<br /><br />During the last decade, India’s iron ore miners became important global players in the export market, particularly China. In 2009-10, India was the third largest exporter of iron ore, next only to large global miners such as Vale, Rio Tinto and BHP Billiton. To meet the huge burgeoning demand, particularly from powerhouse China, many domestic players capitalised on liberal government policies during the early 2000s and bought or leased new mines at relatively cheap prices, expanded production capacity, and smiled all the way to the bank as profits skyrocketed.<br /><br />But the sheen quickly came off the industry and the smiles were wiped off as allegations of illegal mining, under-reporting and skimming away of profits to the detriment of the government treasury surfaced in Karnataka in 2010. The fire generated in Karnataka quickly spread to other major mining States such as Odisha and Goa, forcing active intervention by State governments and judicial authorities. The comprehensive clean-up operation that consequently got underway resulted in a ban or curbs on iron ore mining in many States (first ban imposed in Karnataka in July 2011; other States later followed suit).<br /><br />For the industry, the double whammy of the mining ban and a sharp increase in export duty on iron ore fines (currently, 30 per cent) killed its golden goose: exports. The high export duty has been compounded by the frequent sharp upward revisions in rail freight rates, making exports unviable for hinterland producers. Consequently, exports, which stood at 117 million tonnes (53 per cent of output) in 2009-10, are expected to slump to virtually nothing (15-20 million tonnes) in 2012-13. In most cases, miners from Australia, Brazil and, lately, South Africa have stepped in to fill the breach created by India’s forced exit and snatched market share.<br /><br />Hitherto, India’s iron ore exports were mainly in the form of fines, and primarily to China. Recently, as iron ore (62 per cent Fe) spot prices soared to nearly $144/dry metric tonne at CFR Tianjin port in December, up nearly $30/dmt from November, led by inventory-build-up in China, India’s miners could only watch in dismay and rue the lost opportunity. The premium seen in prices of lower grade ore in China is believed to be a consequence of India’s absence from the market because many steel mills in China that use low grade iron ore imported the material from India.<br /><br />Inevitably, the mining ban has also resulted in supply constraints in the domestic iron ore market, which we believe, has kept domestic prices firm in 2012-13. In the domestic market, availability of iron ore has worsened since the Supreme Court imposed an interim ban on mining of iron ore in Karnataka on July 29, 2011, citing environmental degradation. In the second-half of 2012-13, owing to the government clampdown on illegal mining, production/ availability of iron ore from Odisha and Goa have got constrained. The mining ban and the government clampdown on illegal miners have led to a tight supply situation.<br /><br />Over the next two years, demand supply balance is expected to be tight with production of iron ore expected to be in the range of 125-145 million tonnes, domestic demand being around 130-140 million tonnes. On account of this tight balance, iron and steel companies face an acute shortage of iron ore in 2012-13. Many faced closure, others experienced low utilisation levels. Consequently, miners are fetching better realisations in the domestic iron ore market, where prices have spiked significantly. The situation is expected to improve marginally in 2013-14. Prices will ease slightly as efforts are underway to alleviate the supply situation and gradually restore the industry to some degree of normalcy.<br /><br />New, more fair and transparent norms for iron ore mining are now being put in place in many States so that all stakeholders benefit, and the first results of these measures should be visible in Karnataka sometime during the course of this year, in the form of improved supply.<br /><br />We expect the domestic iron ore supply scenario to gradually improve over the medium-term and come back to an even keel, but even then it is highly unlikely that the industry will recover in a hurry the exporter status that it enjoyed in its heydays. The days of unbridled profits are perhaps over.<br /><br /><em>The author is Director, Crisil Research, a division of Crisil</em></div>
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<br><a href="http://www.thehindu.com/business/Industry/days-of-excessive-profits-are-over/article4491985.ece?homepage=true" class="re" target="_blank">The Hindu, 11 March, 2013, http://www.thehindu.com/business/Industry/days-of-excessive-profits-are-over/article4491985.ece?homepage=true</a><div class="clear"></div>
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<h1 class="cat-box-title">Days of excessive profits are over-Ajay Dsouza</h1>
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Published on</span><span class="text-date"> Mar 11, 2013</span>
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<div align="justify">-The Hindu<br /><br /><em>New, more fair and transparent norms for iron ore mining are now being put in place in many States<br /></em><br />Hit by debilitating mining curbs (including an outright ban in some States) and a clampdown on exports through high duties, India’s iron ore industry today is a pale shadow of what it was for much of the last decade, despite some recent forward movement on restarting iron ore mining in Karnataka, one of the key producer States.<br /><br />During the last decade, India’s iron ore miners became important global players in the export market, particularly China. In 2009-10, India was the third largest exporter of iron ore, next only to large global miners such as Vale, Rio Tinto and BHP Billiton. To meet the huge burgeoning demand, particularly from powerhouse China, many domestic players capitalised on liberal government policies during the early 2000s and bought or leased new mines at relatively cheap prices, expanded production capacity, and smiled all the way to the bank as profits skyrocketed.<br /><br />But the sheen quickly came off the industry and the smiles were wiped off as allegations of illegal mining, under-reporting and skimming away of profits to the detriment of the government treasury surfaced in Karnataka in 2010. The fire generated in Karnataka quickly spread to other major mining States such as Odisha and Goa, forcing active intervention by State governments and judicial authorities. The comprehensive clean-up operation that consequently got underway resulted in a ban or curbs on iron ore mining in many States (first ban imposed in Karnataka in July 2011; other States later followed suit).<br /><br />For the industry, the double whammy of the mining ban and a sharp increase in export duty on iron ore fines (currently, 30 per cent) killed its golden goose: exports. The high export duty has been compounded by the frequent sharp upward revisions in rail freight rates, making exports unviable for hinterland producers. Consequently, exports, which stood at 117 million tonnes (53 per cent of output) in 2009-10, are expected to slump to virtually nothing (15-20 million tonnes) in 2012-13. In most cases, miners from Australia, Brazil and, lately, South Africa have stepped in to fill the breach created by India’s forced exit and snatched market share.<br /><br />Hitherto, India’s iron ore exports were mainly in the form of fines, and primarily to China. Recently, as iron ore (62 per cent Fe) spot prices soared to nearly $144/dry metric tonne at CFR Tianjin port in December, up nearly $30/dmt from November, led by inventory-build-up in China, India’s miners could only watch in dismay and rue the lost opportunity. The premium seen in prices of lower grade ore in China is believed to be a consequence of India’s absence from the market because many steel mills in China that use low grade iron ore imported the material from India.<br /><br />Inevitably, the mining ban has also resulted in supply constraints in the domestic iron ore market, which we believe, has kept domestic prices firm in 2012-13. In the domestic market, availability of iron ore has worsened since the Supreme Court imposed an interim ban on mining of iron ore in Karnataka on July 29, 2011, citing environmental degradation. In the second-half of 2012-13, owing to the government clampdown on illegal mining, production/ availability of iron ore from Odisha and Goa have got constrained. The mining ban and the government clampdown on illegal miners have led to a tight supply situation.<br /><br />Over the next two years, demand supply balance is expected to be tight with production of iron ore expected to be in the range of 125-145 million tonnes, domestic demand being around 130-140 million tonnes. On account of this tight balance, iron and steel companies face an acute shortage of iron ore in 2012-13. Many faced closure, others experienced low utilisation levels. Consequently, miners are fetching better realisations in the domestic iron ore market, where prices have spiked significantly. The situation is expected to improve marginally in 2013-14. Prices will ease slightly as efforts are underway to alleviate the supply situation and gradually restore the industry to some degree of normalcy.<br /><br />New, more fair and transparent norms for iron ore mining are now being put in place in many States so that all stakeholders benefit, and the first results of these measures should be visible in Karnataka sometime during the course of this year, in the form of improved supply.<br /><br />We expect the domestic iron ore supply scenario to gradually improve over the medium-term and come back to an even keel, but even then it is highly unlikely that the industry will recover in a hurry the exporter status that it enjoyed in its heydays. The days of unbridled profits are perhaps over.<br /><br /><em>The author is Director, Crisil Research, a division of Crisil</em></div>
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<br><a href="http://www.thehindu.com/business/Industry/days-of-excessive-profits-are-over/article4491985.ece?homepage=true" class="re" target="_blank">The Hindu, 11 March, 2013, http://www.thehindu.com/business/Industry/days-of-excessive-profits-are-over/article4491985.ece?homepage=true</a><div class="clear"></div>
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LATEST NEWS UPDATES | Days of excessive profits are over-Ajay Dsouza </title>
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<h1 class="cat-box-title">Days of excessive profits are over-Ajay Dsouza</h1>
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Published on</span><span class="text-date"> Mar 11, 2013</span>
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<div align="justify">-The Hindu<br /><br /><em>New, more fair and transparent norms for iron ore mining are now being put in place in many States<br /></em><br />Hit by debilitating mining curbs (including an outright ban in some States) and a clampdown on exports through high duties, India’s iron ore industry today is a pale shadow of what it was for much of the last decade, despite some recent forward movement on restarting iron ore mining in Karnataka, one of the key producer States.<br /><br />During the last decade, India’s iron ore miners became important global players in the export market, particularly China. In 2009-10, India was the third largest exporter of iron ore, next only to large global miners such as Vale, Rio Tinto and BHP Billiton. To meet the huge burgeoning demand, particularly from powerhouse China, many domestic players capitalised on liberal government policies during the early 2000s and bought or leased new mines at relatively cheap prices, expanded production capacity, and smiled all the way to the bank as profits skyrocketed.<br /><br />But the sheen quickly came off the industry and the smiles were wiped off as allegations of illegal mining, under-reporting and skimming away of profits to the detriment of the government treasury surfaced in Karnataka in 2010. The fire generated in Karnataka quickly spread to other major mining States such as Odisha and Goa, forcing active intervention by State governments and judicial authorities. The comprehensive clean-up operation that consequently got underway resulted in a ban or curbs on iron ore mining in many States (first ban imposed in Karnataka in July 2011; other States later followed suit).<br /><br />For the industry, the double whammy of the mining ban and a sharp increase in export duty on iron ore fines (currently, 30 per cent) killed its golden goose: exports. The high export duty has been compounded by the frequent sharp upward revisions in rail freight rates, making exports unviable for hinterland producers. Consequently, exports, which stood at 117 million tonnes (53 per cent of output) in 2009-10, are expected to slump to virtually nothing (15-20 million tonnes) in 2012-13. In most cases, miners from Australia, Brazil and, lately, South Africa have stepped in to fill the breach created by India’s forced exit and snatched market share.<br /><br />Hitherto, India’s iron ore exports were mainly in the form of fines, and primarily to China. Recently, as iron ore (62 per cent Fe) spot prices soared to nearly $144/dry metric tonne at CFR Tianjin port in December, up nearly $30/dmt from November, led by inventory-build-up in China, India’s miners could only watch in dismay and rue the lost opportunity. The premium seen in prices of lower grade ore in China is believed to be a consequence of India’s absence from the market because many steel mills in China that use low grade iron ore imported the material from India.<br /><br />Inevitably, the mining ban has also resulted in supply constraints in the domestic iron ore market, which we believe, has kept domestic prices firm in 2012-13. In the domestic market, availability of iron ore has worsened since the Supreme Court imposed an interim ban on mining of iron ore in Karnataka on July 29, 2011, citing environmental degradation. In the second-half of 2012-13, owing to the government clampdown on illegal mining, production/ availability of iron ore from Odisha and Goa have got constrained. The mining ban and the government clampdown on illegal miners have led to a tight supply situation.<br /><br />Over the next two years, demand supply balance is expected to be tight with production of iron ore expected to be in the range of 125-145 million tonnes, domestic demand being around 130-140 million tonnes. On account of this tight balance, iron and steel companies face an acute shortage of iron ore in 2012-13. Many faced closure, others experienced low utilisation levels. Consequently, miners are fetching better realisations in the domestic iron ore market, where prices have spiked significantly. The situation is expected to improve marginally in 2013-14. Prices will ease slightly as efforts are underway to alleviate the supply situation and gradually restore the industry to some degree of normalcy.<br /><br />New, more fair and transparent norms for iron ore mining are now being put in place in many States so that all stakeholders benefit, and the first results of these measures should be visible in Karnataka sometime during the course of this year, in the form of improved supply.<br /><br />We expect the domestic iron ore supply scenario to gradually improve over the medium-term and come back to an even keel, but even then it is highly unlikely that the industry will recover in a hurry the exporter status that it enjoyed in its heydays. The days of unbridled profits are perhaps over.<br /><br /><em>The author is Director, Crisil Research, a division of Crisil</em></div>
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<br><a href="http://www.thehindu.com/business/Industry/days-of-excessive-profits-are-over/article4491985.ece?homepage=true" class="re" target="_blank">The Hindu, 11 March, 2013, http://www.thehindu.com/business/Industry/days-of-excessive-profits-are-over/article4491985.ece?homepage=true</a><div class="clear"></div>
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LATEST NEWS UPDATES | Days of excessive profits are over-Ajay Dsouza
Published on Mar 11, 2013
Modified on Mar 11, 2013
-The Hindu
New, more fair and transparent norms for iron ore mining are now being put in place in many States
Hit by debilitating mining curbs (including an outright ban in some States) and a clampdown on exports through high duties, India’s iron ore industry today is a pale shadow of what it was for much of the last decade, despite some recent forward movement on restarting iron ore mining in Karnataka, one of the key producer States.
During the last decade, India’s iron ore miners became important global players in the export market, particularly China. In 2009-10, India was the third largest exporter of iron ore, next only to large global miners such as Vale, Rio Tinto and BHP Billiton. To meet the huge burgeoning demand, particularly from powerhouse China, many domestic players capitalised on liberal government policies during the early 2000s and bought or leased new mines at relatively cheap prices, expanded production capacity, and smiled all the way to the bank as profits skyrocketed.
But the sheen quickly came off the industry and the smiles were wiped off as allegations of illegal mining, under-reporting and skimming away of profits to the detriment of the government treasury surfaced in Karnataka in 2010. The fire generated in Karnataka quickly spread to other major mining States such as Odisha and Goa, forcing active intervention by State governments and judicial authorities. The comprehensive clean-up operation that consequently got underway resulted in a ban or curbs on iron ore mining in many States (first ban imposed in Karnataka in July 2011; other States later followed suit).
For the industry, the double whammy of the mining ban and a sharp increase in export duty on iron ore fines (currently, 30 per cent) killed its golden goose: exports. The high export duty has been compounded by the frequent sharp upward revisions in rail freight rates, making exports unviable for hinterland producers. Consequently, exports, which stood at 117 million tonnes (53 per cent of output) in 2009-10, are expected to slump to virtually nothing (15-20 million tonnes) in 2012-13. In most cases, miners from Australia, Brazil and, lately, South Africa have stepped in to fill the breach created by India’s forced exit and snatched market share.
Hitherto, India’s iron ore exports were mainly in the form of fines, and primarily to China. Recently, as iron ore (62 per cent Fe) spot prices soared to nearly $144/dry metric tonne at CFR Tianjin port in December, up nearly $30/dmt from November, led by inventory-build-up in China, India’s miners could only watch in dismay and rue the lost opportunity. The premium seen in prices of lower grade ore in China is believed to be a consequence of India’s absence from the market because many steel mills in China that use low grade iron ore imported the material from India.
Inevitably, the mining ban has also resulted in supply constraints in the domestic iron ore market, which we believe, has kept domestic prices firm in 2012-13. In the domestic market, availability of iron ore has worsened since the Supreme Court imposed an interim ban on mining of iron ore in Karnataka on July 29, 2011, citing environmental degradation. In the second-half of 2012-13, owing to the government clampdown on illegal mining, production/ availability of iron ore from Odisha and Goa have got constrained. The mining ban and the government clampdown on illegal miners have led to a tight supply situation.
Over the next two years, demand supply balance is expected to be tight with production of iron ore expected to be in the range of 125-145 million tonnes, domestic demand being around 130-140 million tonnes. On account of this tight balance, iron and steel companies face an acute shortage of iron ore in 2012-13. Many faced closure, others experienced low utilisation levels. Consequently, miners are fetching better realisations in the domestic iron ore market, where prices have spiked significantly. The situation is expected to improve marginally in 2013-14. Prices will ease slightly as efforts are underway to alleviate the supply situation and gradually restore the industry to some degree of normalcy.
New, more fair and transparent norms for iron ore mining are now being put in place in many States so that all stakeholders benefit, and the first results of these measures should be visible in Karnataka sometime during the course of this year, in the form of improved supply.
We expect the domestic iron ore supply scenario to gradually improve over the medium-term and come back to an even keel, but even then it is highly unlikely that the industry will recover in a hurry the exporter status that it enjoyed in its heydays. The days of unbridled profits are perhaps over.
The author is Director, Crisil Research, a division of Crisil
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