News Content
As iron ore economy crumbles, ports, shippers seek alternatives
Tata NYK Shipping Pte Ltd runs on a triangular route from Australia to Mormugao in India and then to China. The joint venture set up in 2007 between India's largest business group and one of the world's largest shipping line was expected to tap into the huge coal and iron ore business emerging between these three giant economies on the three flanks of the Asia-Pacific region.
But six years later, as the Indian government one by one switched off its iron ore mines in Goa, Karnataka and Orissa and delays in clearance mothballed the coast-based power plants, the liner is staring at growth in throughput that has dropped to 4.6 per cent in 2013 and is expected to barely improve to 9.5 per cent in 2014.
At the same time, all the mineral exporting ports in India are desperately looking to change their business. Ministry of shipping performance data shows of the 13 major ports, the worst hit were these.
Exports from Paradip declined by 72 per cent in FY13, Mormugao logged an equaly harsh 71 per cent dip and New Mangalore of 14 per cent. These are all the outlets of the three iron ore rich states.
Paradip is now trying to move into the LNG business though it faces no West Asian gas or oil rich states with the shipping ministry giving it a go-ahead. "Our plan is to ferry coal to India and on the return leg carry iron ore from there to China. It is not happening," Fujimoto Kazuyoshi, manager of the Asia Group of NYK Container Line, whose subsidiary is the joint-venture with Tatas told The Indian Express.
While the coal shortage has hit primarily the power sector, it is the absence of iron ore with a larger diversified use that has made mincemeat of India's manufacturing sector.
Just kilometers away from Tata Steel's Jamshedpur city in the downstream Adityapur industrial town, the plans for an auto cluster are literally gathering rust. Progress reports show three years after the project was conceived just a fifth of the amount has been used and the building supposed to be a nerve centre for the local ancillary just a pile of bricks.
These ancillaries include sponge iron and ferrochrome units. At Rs 3,500 crore the sponge iron sector was once the largest in the world. But manufacturers such as Essar Steel, Welspun Maxsteel and Tata Sponge Iron, today are battling for survival.
By March 2013, the production of sponge iron fell to less than 19 million tonne a drop of 26 per cent in two years. Sponge iron is an important material used for steel making by smaller mills, eliminating the need to use expensive and scarce thermal coal and gas.
Others like ferrochrome makers are hoping for better times. India accounts for about a tenth of the global ferrochrome market with a production of almost one million tonne per annum. But this figure too has remained stagnant for the last three years. Domestic manufacturers are hopeful that in FY15 as steel capacity rises the local demand for ferrochrome should rise.
But rating agency Moody's Investors Service is less upbeat. For calendar 2014 it has a negative outlook for the two sectors as it believes reforms needed to revive the economy will be postponed for now. In 2013, Indian steel consumption has logged just about 1.8 per cent growth rate. The scene has worsened compared to even fiscal FY13 when demand grew at 3.3 per cent.
"We are very keen to get a local iron ore mine", says JSW Steel joint MD Seshagiri Rao. He has reasons. Indian steel manufacturers like his company are getting priced out of the global steel market. But mines are not available despite huge reserves as the government is yet to come up a policy for auctioning the mines.
Engineering Export Promotion Council data shows Chinese steel producers have beaten Indians hollow, since companies here like JSW do not have access to cheap domestic iron ore. "The international market for steel has been witnessing turmoil (as) Indian steel-makers have not been able to remain competitive amidst sharp depreciation of rupee."
EEPC estimates India's production would grow just at an annual 6.3 per cent to reach 104 million tonnes by 2017 from 78.6 million tonnes in 2012. The higher prices of steel products locally make downstream automobiles for instance costlier while lower competitiveness abroad means steel makers have less room to offer incentive to buy more.
Almost all steel makers have raised price between Rs 1,000 and Rs 1,500 per tonne with effect from January 1. "The cost of steel and pig iron, is among the major disadvantages faced by the Indian engineering user industries," says EEPC chairman Anupam Shah.
The curtains down scenario have hammered the Indian Railways too. After coal, iron ore is the second biggest contributor in Railways' freight earnings, accounting for 10 per cent of its total freight revenues. Revenues from carrying exportable iron ore has fallen sharply by over 56 per cent in FY13 to Rs 1,132.36 crore. This is expected to fall further by 4 per cent this fiscal.
Source: Indian Express
But six years later, as the Indian government one by one switched off its iron ore mines in Goa, Karnataka and Orissa and delays in clearance mothballed the coast-based power plants, the liner is staring at growth in throughput that has dropped to 4.6 per cent in 2013 and is expected to barely improve to 9.5 per cent in 2014.
At the same time, all the mineral exporting ports in India are desperately looking to change their business. Ministry of shipping performance data shows of the 13 major ports, the worst hit were these.
Exports from Paradip declined by 72 per cent in FY13, Mormugao logged an equaly harsh 71 per cent dip and New Mangalore of 14 per cent. These are all the outlets of the three iron ore rich states.
Paradip is now trying to move into the LNG business though it faces no West Asian gas or oil rich states with the shipping ministry giving it a go-ahead. "Our plan is to ferry coal to India and on the return leg carry iron ore from there to China. It is not happening," Fujimoto Kazuyoshi, manager of the Asia Group of NYK Container Line, whose subsidiary is the joint-venture with Tatas told The Indian Express.
While the coal shortage has hit primarily the power sector, it is the absence of iron ore with a larger diversified use that has made mincemeat of India's manufacturing sector.
Just kilometers away from Tata Steel's Jamshedpur city in the downstream Adityapur industrial town, the plans for an auto cluster are literally gathering rust. Progress reports show three years after the project was conceived just a fifth of the amount has been used and the building supposed to be a nerve centre for the local ancillary just a pile of bricks.
These ancillaries include sponge iron and ferrochrome units. At Rs 3,500 crore the sponge iron sector was once the largest in the world. But manufacturers such as Essar Steel, Welspun Maxsteel and Tata Sponge Iron, today are battling for survival.
By March 2013, the production of sponge iron fell to less than 19 million tonne a drop of 26 per cent in two years. Sponge iron is an important material used for steel making by smaller mills, eliminating the need to use expensive and scarce thermal coal and gas.
Others like ferrochrome makers are hoping for better times. India accounts for about a tenth of the global ferrochrome market with a production of almost one million tonne per annum. But this figure too has remained stagnant for the last three years. Domestic manufacturers are hopeful that in FY15 as steel capacity rises the local demand for ferrochrome should rise.
But rating agency Moody's Investors Service is less upbeat. For calendar 2014 it has a negative outlook for the two sectors as it believes reforms needed to revive the economy will be postponed for now. In 2013, Indian steel consumption has logged just about 1.8 per cent growth rate. The scene has worsened compared to even fiscal FY13 when demand grew at 3.3 per cent.
"We are very keen to get a local iron ore mine", says JSW Steel joint MD Seshagiri Rao. He has reasons. Indian steel manufacturers like his company are getting priced out of the global steel market. But mines are not available despite huge reserves as the government is yet to come up a policy for auctioning the mines.
Engineering Export Promotion Council data shows Chinese steel producers have beaten Indians hollow, since companies here like JSW do not have access to cheap domestic iron ore. "The international market for steel has been witnessing turmoil (as) Indian steel-makers have not been able to remain competitive amidst sharp depreciation of rupee."
EEPC estimates India's production would grow just at an annual 6.3 per cent to reach 104 million tonnes by 2017 from 78.6 million tonnes in 2012. The higher prices of steel products locally make downstream automobiles for instance costlier while lower competitiveness abroad means steel makers have less room to offer incentive to buy more.
Almost all steel makers have raised price between Rs 1,000 and Rs 1,500 per tonne with effect from January 1. "The cost of steel and pig iron, is among the major disadvantages faced by the Indian engineering user industries," says EEPC chairman Anupam Shah.
The curtains down scenario have hammered the Indian Railways too. After coal, iron ore is the second biggest contributor in Railways' freight earnings, accounting for 10 per cent of its total freight revenues. Revenues from carrying exportable iron ore has fallen sharply by over 56 per cent in FY13 to Rs 1,132.36 crore. This is expected to fall further by 4 per cent this fiscal.
Source: Indian Express
Latest News
- For the first time, tianjin Port realized the whole process of dock operati...
- From January to August, piracy incidents in Asia increased by 38%!The situa...
- Quasi-conference TSA closes as role redundant in mega merger world
- Singapore says TPP, born again as CPTPP, is now headed for adoption
- Antwerp posts 5th record year with boxes up 4.3pc to 10 million TEU
- Savannah lifts record 4 million TEU in '17 as it deepens port
