Digital Goa News Service
Panaji, April 9 - In a major setback to Goa's mining industry, China, major importer of Goa's mineral ore, has banned Chinese trading houses from importing low-grade iron ore.
According to reports coming here, China has placed a ban on imports with Fe (iron) content less than 60%. The ban is applicable to traders importing iron ore and is not applicable on imports from steel plants.
Goa Mineral Exporters Association (GMOEA) has expressed fears that the ban would adversely affect the Goan mining industry. It may be noted that 70 % of Goa's iron ore export is to China while 80 per cent of this is low grade ore. The ban will have direct impact on as much as 30 Million Tonnes, said an official of GMOEA.
As per the reports reaching here, Beijing has banned Chinese trading houses from importing low-quality iron in a move that could, paradoxically, increase the raw material procurement costs of the country's steelmakers, trading sources said yesterday.
The surprising decision comes as the 40-year-old pricing system for iron ore, based on annual prices and lengthy negotiations, crumbles. The system has been replaced by quarterly contracts linked to the spot market, where prices are higher. In most cases, steelmakers will end up paying up to twice as much for the commodity.
China is the world's largest iron ore importer, accounting last year for about 70 per cent of the $200bn-a-year seaborne market, up from 16 per cent a decade ago.
The official China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters, known as CCCMC, sent a letter to traders this week ordering them to stop importing ore with iron content below 60 per cent.
Steelmakers and their brokers are not affected by the ban, a trading executive familiar with matter told the Financial Times. He added it was unclear who would enforce the ban and how it would do so. In the past, attempts to ban imports have failed.
If the CCCMC directive is enforced, it would reduce iron ore flows from India, the world's third-largest exporter, into China, forcing traders to import from elsewhere, driving up benchmark spot prices. Australian ore has a 62 per cent iron content and it is the benchmark used in the industry as the main reference to set the new quarterly contracts.
Brazilian ore has, in general, an iron content of about 63.5 per cent to 65 per cent. India's ore generally has an iron content of 55 per cent to 58 per cent.
The news of the ban helped to push the cost of spot Australian benchmark iron ore - 62 per cent iron content - to a fresh 18-month high of $166.20 per tonne, up 3.1 per cent on the day.
"The ban is already playing a role in the market's psychology," a broker said. Iron ore prices have surged 40.6 per cent since January.
Traders and brokers said they were perplexed by the ban. The move by the CCCMC comes only days after the China Iron and Steel Association, the trade body that last year represented the country in the ore negotiations with the miners, to boycott Vale, Rio Tinto and BHP Billiton.
The boycott call was largely dismissed by analysts, who said that Chinese steelmakers had only two months' worth of stockpiles and needed the supplies from the three big miners.
Melinda Moore, an iron ore analyst at Credit Suisse, said that "any attempted boycott of iron ore [was] impractical and likely to backfire".