Read article appearing on mineweb http://www.mineweb.com/mineweb/view/mineweb/en/page39?oid=109540&sn=Detail&pid=92730 India's largest iron ore exporter, Sesa Goa Ltd, is in a bind. China has banned all iron ore imports with Fe content less than 60%, and half of Sesa Goa's production is below 60% Fe content. Considering the uncertain outlook on iron ore realisations and demand from the export market, the company's near-term prospects appear uncertain, analysts have said. Sesa Goa, which is controlled by billionaire Anil Agarwal, exports 93% of its production, with China accounting for a whopping 83%, followed by South Korea, Japan and Europe.
Statistics show that China imported 106 million tonnes of Indian iron ore during the last 12 months. The figure accounts for 18% of all Chinese imports in 2009. India is the world's fourth largest iron ore producer, with production touching 230 million tonnes. Even as Chinese companies are buying up ore mines with two billion worth of reserves in Africa, the Chinese government imposed a ban on the import of low grade iron ore. The ban came into effect after the China Iron and Steel Association advised ore buyers at a conference to stop buying low grade ores. Analysts tracking the sector said China is expected to produce 600 metric tonnes of steel this year. ``Its largest player has just 25 metric tonnes of annual capacity. Moreover, the industry there is trying to consolidate. The ban could be an effort to cut down supply to smaller units,'' said Prakash Mehrey, an analyst with ICICI Direct, a unit of Mumbai-based brokerage ICICI Securities. He added that the ban had not caused a major uproar as yet. Given the low offtake from steel mills and the fact that the Goa port is closed for the monsoon, a clearer picture would only emerge at the end of next month. The Goa port ships nearly half of Indian ores to China. Analysts said the Chinese decision to ban low-grade iron ore has come into play as the 40-year-old pricing system, for iron ore based on annual prices, came unstuck. The system has been replaced by quarterly contracts linked to the spot market, where prices are higher. The world's third-largest iron ore miner, BHP Billiton, has also said it will sell the majority of its production to Asian steel mills on shorter-term contracts. Reports have indicated that the Chinese government has not extended its ban on imports of iron ore with Fe content less than 60% to material Chinese mills purchase directly from suppliers. Analysts maintain that this is a loophole that Sesa Goa could well use to its benefit.
