(MENAFN - Gulf Times) A China-led flight to quality in the global iron ore market is punishing producers of the lower-grade material, with miners in India facing an increasing battle to find buyers for their cargoes as demand dwindles.
In Goa, exporters are struggling to sell even a quarter of what they shipped last year, according to Glenn Kalavampara, secretary at the Goa Mineral Ore Exporters' Association. 'There's absolutely no market, he said by phone from Panaji, capital of the western state that's better known for its sparkling beach resorts. 'The preference for higher-grade ore is a major concern. he said.
While Indian exports account for just a fraction of the global seaborne market of about 1.4bn tonnes that's dominated by Vale SA, Rio Tinto Group and BHP Billiton, the plight of the low-grade shippers highlights the new dynamic.
A concerted anti-pollution push in China this winter has supercharged the premium commanded by higher-grade material, which is more efficient. This week, Rio pointed to 'clear evidence of a structural change in the market, and earlier this year, BHP highlighted the industry's 'new reality.
'There are hardly any exports, RK Sharma, secretary-general of the Federation of Indian Mineral Industries, said by phone from New Delhi.
Sharma has been working in the sector for almost five decades, and at one time saw Indian exports top 100mn tonnes. 'Even the Goans who are near the ports and have the least costs in the country are not able to sell, he said.
China's push to clean the air has exploded the price differential between high and low grades. On Thursday, spot ore with 65% iron content from Brazil was at $85.20 a dry tonne, while benchmark material of 62% was $65.70, and 58% was less than $40, according to Metal Bulletin.
Goa shipped half of India's total exports of about 31mn tonnes in 2016-17, with a seasonal pattern to trade, as the retreat of the four-month monsoon around the end of September usually brings a revival in activity.
That's not happened this year, and miners from the state, which include Vedanta, have shipped just 680,000 tonnes of lower-content ores in the two months since mining resumed, down 76% from a year ago, according to Kalavampara.
That China's overall demand remains robust even as poorer grades get shut out and some mills are forced to trim production to ease pollution over winter was in focus yesterday. Data from Beijing showed year-to-date purchases near 1bn tonnes over 11 months as imports snapped back in November.
With the global market in flux, banks are factoring in lower shipments from India. Citigroup which is bullish on the outlook for prices in the first quarter expects exports will drop to 20mn tonnes next year from 28mn in 2017, according to its annual commodities outlook. After holding steady in 2019, the nation's flows may slump to 10mn tons in 2020.
In India, exports of ore above 58% attract a duty of 30%, and miners have been seeking to have the levy scrapped to enable them to better compete with global players.
'You know how aggressive Australia and Brazil are, said Kalavampara. 'We have requested the central government to kindly consider scrapping tax for up to 60% to start with.
The difficulty in exporting lower-grade ore has led to a build-up of inventories at ports and mines. In October, Vedanta said it's sitting on stockpiles of about 4mn tonnes, according to R Kishore Kumar, chief executive officer of the iron ore division. The company plans to raise the iron content in its ore to 58-to-59% from 54-to-57%.

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