China to keep supplied with Indian iron ore despite Karnataka ban.

India's balance of trade with China was set to have been brutally hit this month, given Karnataka's ban on the export of Indian iron ore. Three states have, however, banded together as unlikely saviours to ensure that key consumer China does not have to turn to top producers Australia and Brazil, for all of its iron ore supply.

Late last month, the South Indian state of Karnataka, India's second largest producer of iron ore, banned exports of the steel-making ingredient. At around the same time, the western state of Goa ceased exports of iron ore due to the monsoon season. Even as these incidents helped firm up prices in the $88-billion international market, three states - Orissa, Jharkhand and Goa, have decided to step in and ramp up supplies.

``Due to the ban, there is around 2.5 to 3 million tonne of iron ore lying unshipped at the Karnataka ports,'' said an official with iron ore exporter, MSPL of the Baldota Group, one of the miners hit by the ban. Since the other states do not have any logistic bottlenecks, MSPL and others of its ilk, have decided to get their supplies from the adjoining states, to ensure a smooth transaction with their counterparts in China.

Orissa, Goa and Karnataka are the major contributors to India's annual iron ore export of about 120 million tonne, of which 75% is procured by Chinese steel mills. China has an annual consumption of close to a billion tonnes of iron ore and is said to source some 80% of its requirement from Brazil and Australia. India accounts for most of the rest.

Karnataka which is endowed with approximately 9.03 billion tonnes (around 40% of India's estimated total haematite and magnetite ore resources), produced 45.94 million tonnes of iron ore for the year to March 2009. During the same time, India produced 215 million tonnes and exported 106 million tonnes. Of the 210-240 million tonnes mined annually, India's domestic requirement is around 80 million tonnes.

The Karnataka ban follows a campaign by the Central government to rein in illegal miners who have been selling iron ore but not paying taxes. Goa, which is a major exporter of iron ore fines and is also a tourist hot-spot, exports approximately 45 million tonnes of the commodity a year. The state also is struggling to clamp down on exports of illegally mined iron ore.

Traders have noted that the output of crude steel from China has registered a second straight monthly fall in July, as plants scaled back their production due to a rise in global iron ore prices. On Monday, August 23, customs data showed that China's imports of iron ore from India plummeted 21% in July to 6.5 million tonnes. Australia, Brazil and India have reportedly delivered 78% of China's total imports over the month, down from 80% in June

Source : mineweb.co.za