India's 2012/13 iron ore exports may halve.

(Reuters) - India's iron ore shipments may plunge by as much as 57 percent in 2012/13 as a ban on mining and higher export taxes bite, knocking the country off its position as the world's third largest supplier and boosting global prices.

Exports of the steelmaking raw material may drop to as low as 30 million tonnes in 2012/13, falling for a third straight year, the head of India's top iron ore miner said.

"Exports will be 30-40 million tonnes in 2012/13 after meeting 100-120 million tonnes of local demand," state-owned NMDC Chairman Narendra Kumar Nanda told the Reuters Global Mining and Metals Summit.

Iron ore exports from India in the first nine months of the year from April 2011 slumped 30.4 percent to 46 million tonnes from the year-ago period and could be 65-70 million tonnes in the full year, according to major exporter Sesa Goa.

India sells about 92 percent of its iron ore to China, which is home to the world's largest steel industry.

Last year India's exports ranked it behind Australia and Brazil but now sales may fall below South Africa's 52 million tonnes in 2011 and come close to Canada's 35 million tonnes.

Iron ore shipments from India have been sliding for the last two years, with a ban on mining in the top-producing southern state Karnataka hitting output. Hikes in export taxes as the government tries to keep supplies for domestic use have also hurt overseas sales.

India is expected to produce 150-160 million tonnes of iron ore in 2011/12, sharply down from the previous year's 208 million tonnes, according to industry estimates.

Nanda said production in 2012/13 would be similar with a 5-10 percent margin of error.

NMDC's output target for 2012/13 was 30 million tonnes, Nanda said, up from some 27 million tonnes expected in the current fiscal year that ends on March 31.

He said about 10 percent of NMDC's output next year could be supplied to Japanese steel buyers under a new government deal. Japan sales would be the only exports for NMDC in 2012/13 after it sold 400,000 tonnes to Japan and China in the current year.

"The minimum sale to Japan could be 2.8 million tonnes while the maximum exports (to Japan) could be 3.6 million tonnes."

NMDC is unwilling to sell more overseas as the government wants to promote the domestic steel industry, he said.

"We hope to sign a contract for supply to Japan next month," Nanda said, but declined to give the likely export price.

Nanda said strong domestic demand from a growing steel industry should cut the availability for export and this would mean the government would have less cause to hike duties again.

"The rise in domestic demand for steel will progressively cut iron ore supplies from India to the global market," he said. "I don't think the export tax will be revised upwards as it was hiked recently."

Earlier this year India raised export taxes to 30 percent from 20 percent as it sought to conserve supplies for its steel industry, which is growing at 7-8 percent per year.

Nanda said the government's decision to reduce the duty in its March 16 budget on imports of machinery for setting up or expansion of pelletisation plants was aimed to promote local use of iron ore for steelmaking.

PRICE OUTLOOK

Lower supplies from India could boost global prices longer term, currently suppressed by high inventories in China, the world's top consumer of iron ore and largest producer of steel.

China's slowing steel demand has already prompted top miner BHP Billiton Ltd to predict flat iron ore demand from China.

"Prices will continue to be influenced by output decisions of leading players like BHP Billiton and Chinese demand," Nanda said.

Nanda forecast a $120-$130 per tonne price band for low grade iron ore with under 62 percent ore content. That is slightly higher than the current level of $115-$120 per tonne, free on board, until December 2012.

Global iron ore prices will remain almost flat in the second half of the year on higher supply prospects from leading global suppliers including BHP Billiton, the NMDC chief said.

"Prices are unlikely to rise sharply so as to hit $200 per tonne as happened early last year," he said.

Iron ore with 62 percent iron content rose for a sixth day in seven on Wednesday, gaining 0.4 percent to $147.7 a tonne, a level last seen on October 19, according to the Steel Index.

PURSUING COAL ASSETS

NMDC is pursuing its quest to acquire coal assets abroad, including in Mozambique and Russia, Nanda said.

Acquiring coal assets overseas will help NMDC feed its steel plants in Karnataka and in Chhattisgarh state in central India. Each of these steel plants have a capacity of 3 million tonnes.

He said a technical team will visit Mozambique next month to do a survey for a possible coal asset, while the company had appointed an agency to do due diligence for acquiring another coal asset in Russia.

Source : in.reuters.com