JP Morgan: Mining Sharp increase in export tax on iron ore fines from 5% to 20%

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Mining
Sharp increase in export tax on iron ore fines from 5%
to 20%

• Export tax on iron ore fines increased to 20%: The Indian Budget has
proposed increasing export taxes on iron ore fines to 20% from the
current 5%. The Budget proposes aligning export taxes on all grades of
iron ore to 20%. In our view this increase should be applicable from
tonight.
• Impact on exports from India: Currently most Indian iron ore exports
take place from Goa where the average Fe grade is significantly lower
(we estimate average grade is below 58%). Karnataka exports in our
view should commence from April only (post the next Supreme Court
hearing scheduled for April). Based on current spot CIF prices of
$190/MT, (translates into FOB price of $170/MT), we see an incremental
tax impact of $16-18/MT on Goan iron ore exports. Spot iron ore prices
are essentially being driven by Chinese demand and spot supply (mainly
from Indian suppliers) and while the cost increase for Indian exporters
provides upward pressure on spot iron ore prices, it does not mean that
the entire increase would be passed through
• No export tax on iron ore pellets: There is no export tax on iron ore
pellets, and we would not be surprised for Indian iron ore exporters to
put up pelletization facilities going forward.
• Any sharp decline in global spot iron ore prices could likely lead to
downward revision of the current export taxes on iron ore fines.