Wednesday, December 30, 2009

Markets cheer hike in iron ore export duty

Mumbai: Shares of six steel product makers rose on the Bombay Stock Exchange on Tuesday after the government increased export duty on iron ore lumps to 10% from the earlier 5% and imposed a 5% export tax on iron ore fines.

Shares of Ispat Industries closed 7.75% above the previous close (Thursday last week, since the markets remained closed on Friday, December 25, and Monday), JSL Ltd was up 4.78 %, Bhushan Steel 1.77 %, Tata Steel 1.02%, SAIL 0.46 %, and JSW Steel 0.08 %.

The government’s move is being seen as a small victory for domestic steel makers who were expecting a rise in iron ore prices. India is the world’s biggest producer of iron-ore and is also one of the biggest exporters of the ore, especially to China.

According to JP Morgan, Asia Pacific equity research report, “Indian iron ore export prices are more a function of China’s demand supply dynamics than India's cost structure and hence, the ability of Indian iron ore exporters being able to pass on the export tax should be a function of China's demand.” “The export taxes could modestly lower costs for the DRI-steel producers. However the March quarter tends to be the strongest quarter demand-wise for the long steel producers,” the report added.

Of the country's total iron-ore output which is estimated at over 200 million tonne, India exports around 95-100 million tonne per year, mainly in the form of fines and lumps. Nearly 80% of India's iron ore exports go to China and the balance to South Korea and Japan.

As per the latest data for the current financial year, Indian iron ore exports for the 7-month period (April to October 2009) increased by 21% in volume terms year-on-year to 53 million tonne, mainly on account of China.

Steel players have already started hiking steel prices, considering a rise in raw material prices of iron ore and coking coal. Tata Steel and state run Steel Authority of India Ltd have already hiked the long product prices by Rs 1,500 to Rs 2,000 per tonne. Others, including Ispat industries, JSW Steel, Essar Steel and Bhushan Steel are considering a price hike from January. The raw material negotiations will start in January next year and the new contract price of iron ore is expected to be about 10-25% higher than the last year.

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Tuesday, December 15, 2009

India’s Exports Climb for First Time in 14 Months

Dec. 15 (Bloomberg) -- India’s exports climbed for the first time in 14 months as an economic recovery in the U.S. and Europe increased demand for the South Asian nation’s products before Christmas.

Overseas shipments rose 18 percent to $13.3 billion in November from a year earlier after sliding an average 21 percent per month since October 2008, according to data provided by the trade ministry.

Asian economies from China to Singapore are recovering from the worst global recession since the 1930s as record-low interest rates and more than $2 trillion in government stimulus helped revive demand. China’s exports fell 1.2 percent in November, the smallest drop in 13 months.

“The revival in India’s biggest markets and building of stocks before Christmas could be the reasons for a sharp surge in exports,” said D. H. Pai Panandiker, president of RPG Foundation, an economic policy group in New Delhi.

Accelerating export growth may boost production at companies and help with a faster revival in Asia’s third-biggest economy, which expanded 7.9 percent in the three months to Sept. 30 from a year earlier, the quickest pace in six quarters.

Overseas sales of gems and jewelry rose to $2.15 billion in November from a year earlier, while those of readymade garments rose to $727 million from $686 million. Shipments of petroleum products rose to $2.46 billion.

Some export segments have started showing growth and the nation’s overseas sales may see a steady positive trend by January, Trade Secretary Rahul Khullar told reporters in New Delhi today.

Low Base

“It’s too early to say we are out of the woods,” RPG’s Panandiker said. “A rise in the rupee is another negative factor, hurting exporters’ earnings.”

The rupee has strengthened 4.4 percent this year as foreign funds purchased $17 billion more Indian stocks than they sold, approaching the record $17.2 billion of net inflows in 2007. The benchmark Bombay Stock Exchange Sensitive Index has risen 75 percent, headed for the best year since 1991.

Exports may have jumped in November because of their low base in the same month last year when shipments slid almost 20 percent to $11.6 billion, Khullar said. “There is no need to go hoopla over these numbers,” he said.

The U.S. returned to growth in the third quarter after a yearlong contraction and France, Germany and Japan have exited their recessions. The U.S. economy, India’s second-biggest export market, expanded 2.8 percent in the July-September quarter.

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