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• Iron ore exports to resume from Karnataka after April 20: As per
various media reports (CNBC, Mint, Business Line), the Indian Supreme
Court will allow iron ore exports to resume on April 20 and has given
the state government 15 days to install infrastructure to curb illegal
mining. The detailed official court order is not available yet, and some
media reports (Livemint) have reported that the SC has issued an interim
stay and will resume hearing the case in May. While this would mean
that the court process could still be an ongoing one, essentially the
miners would be allowed to export ore from April 20 until there is
adverse court final ruling.
• Expect a strong ramp-up in export volumes: Given that the monsoon
(rainy) season starts from July, we expect miners to ramp up export
volumes sharply from April 20: At the peak we estimate that Karnataka
accounted for 20-25MT of India’s iron ore exports (annually). However,
it is difficult to say if the entire volume would come back to market as
the some curbs implemented by the state government to check illegal
mining may have some impact. We would highlight that the marginal
FoB cost to port for ore from Karnataka is >$65/MT given the high
transportation costs.
• However, spot iron ore prices likely to be driven more by the
marginal Chinese mill: According to our estimates, Karnataka with
peak export volumes of 20-25MT accounted for 3-4% of China’s run rate
of 600-640MT iron ore imports. Recently, when India quadrupled the
export tax, spot iron ore prices actually declined 10% as Chinese mills
were de-stocking. In our view, spot iron ore prices will still be driven by
Chinese de/re stocking over the next few months and, given the
increasing floor of marginal production in Chinese domestic iron ore, it
is difficult to foresee spot iron ore prices declining sharply from current
levels.
• Potential domestic winners/losers: JSW Steel (N), in our view,
benefited from the iron ore export ban as it could source cheaper iron ore
in Karnataka, and would likely see this benefit erode. Sesa (NR) has an
EC to export 6MT of iron ore from Karnataka, which until now it could
export.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• Iron ore exports to resume from Karnataka after April 20: As per
various media reports (CNBC, Mint, Business Line), the Indian Supreme
Court will allow iron ore exports to resume on April 20 and has given
the state government 15 days to install infrastructure to curb illegal
mining. The detailed official court order is not available yet, and some
media reports (Livemint) have reported that the SC has issued an interim
stay and will resume hearing the case in May. While this would mean
that the court process could still be an ongoing one, essentially the
miners would be allowed to export ore from April 20 until there is
adverse court final ruling.
• Expect a strong ramp-up in export volumes: Given that the monsoon
(rainy) season starts from July, we expect miners to ramp up export
volumes sharply from April 20: At the peak we estimate that Karnataka
accounted for 20-25MT of India’s iron ore exports (annually). However,
it is difficult to say if the entire volume would come back to market as
the some curbs implemented by the state government to check illegal
mining may have some impact. We would highlight that the marginal
FoB cost to port for ore from Karnataka is >$65/MT given the high
transportation costs.
• However, spot iron ore prices likely to be driven more by the
marginal Chinese mill: According to our estimates, Karnataka with
peak export volumes of 20-25MT accounted for 3-4% of China’s run rate
of 600-640MT iron ore imports. Recently, when India quadrupled the
export tax, spot iron ore prices actually declined 10% as Chinese mills
were de-stocking. In our view, spot iron ore prices will still be driven by
Chinese de/re stocking over the next few months and, given the
increasing floor of marginal production in Chinese domestic iron ore, it
is difficult to foresee spot iron ore prices declining sharply from current
levels.
• Potential domestic winners/losers: JSW Steel (N), in our view,
benefited from the iron ore export ban as it could source cheaper iron ore
in Karnataka, and would likely see this benefit erode. Sesa (NR) has an
EC to export 6MT of iron ore from Karnataka, which until now it could
export.
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