Freight costs scar iron ore exporters

June 5, 2008

June 5th (The Economic Times) – A steep increase in the cost of transporting iron ore by rail is damaging India’s export competitiveness. Miners complain that this may result in country ceding ground to rivals from Brazil and Australia.

The decision by the Railways to reclassify the freight category of iron ore meant for export has resulted in the cost of transporting the mineral rising by 45% in two months, said vice-chairman of the southern regional unit of the Federation of Indian Mineral Industries (FIMI), Basant Poddar. “The rising freight costs are destroying our competitiveness even as we tackle the challenges posed by Brazilian and Australian iron ore exporters who are aggressively targeting China,” he said.

India exports about 100 million tonnes of iron-ore in 2007-08, nearly half of it to China and Japan. Further, agencies such as the New Mangalore Port Trust (NMPT) are proposing the introduction of a daily ‘quota’ system to regulate the arrival of trucks carrying iron ore into the port.

Shantesh Gureddi, chairman of FIMI’s southern regional office, said export this year would be severely hit if the Centre goes ahead with a plan to tax export of iron ore. “Exports can easily slip by 15%-20% if the duty is levied. Australian and Brazilian suppliers are buying large vessels to meet the Chinese demand,” Mr Gureddi cautioned.  While iron ore exports had risen by over 60% during the last year, earning $130-$150 per tonne, the rising freight costs are robbing most of the earnings, Mr Poddar said.
The decision on Wednesday to hike fuel prices would not impact the movement of iron ore, the FIMI officials said. “Currently, bulk of the movement happens by road, which is easily 20%-30% cheaper than rail. Also transporting by rail is dependent on the availability of rakes as well as the presence of rail sidings near mines. This (the fuel price hike) is unlikely to result in a shift in movement from road to rail,” Mr Gureddi said.
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