By Kunal Bose
Indian steel industry faces a series of new challenges as the country is faced with US President Donald Trump’s imposition of 50 per cent tariff on Indian exports to the USA including the steel products. India presents a different picture now where because of the growing domestic demand for ore, there will be diminishing export surpluses. The Indian steel capacity grew 10% during 2024-25 to 205 million tonnes and the country has an ambitious capacity target of 300 million tonnes by 2030.
To the extent steel production then will be through BF/BOF route, the government, which itself owns the country’s largest iron ore producing company NMDC, wants the entire ore demand to be met from domestic sources. A difficult proposition though, considering bureaucratic logjam to be encountered in securing clearances for new mines opening and also for capacity expansion of operating mines. In fact, the possibility remains of India becoming a net importer of iron ore by 2030.
This and the constant lobbying by Indian steel producers that natural resource must be exclusively processed within the country ensured an export duty structure that supports shipments of only iron ore fines of low fe content. The assertion of resource nationalism and fall in Chinese demand for low grades of fines led to 10% contraction in fines export to 30 million tonnes in 2024. The year also saw 24% drop in pellet exports to 8 million tonnes leaving the manufacturers with high idle capacity.
Setback in exports happened when India, the world’s fourth largest producer of the ingredient, lifted 2024-25 iron ore production to 289 million tonnes from 277 million tonnes in the previous year. Citing India’s rich reserves of 25. billion tonnes and the possibility of identifying new major resources through exploration as happens all the time in Australia, Brazil and elsewhere, the country’s leading mining expert RK Sharma says the country has the potential to once again become a major volume exporter. Incidentally, India benefiting from benign foreign trade environment exported 117.37 million tonnes in 2009-10. Exports, however, collapsed to 12.24 million tonnes in 2013-14 following imposition of a 30% export tax on iron ore and 5% on pellets.
Whatever way India’s approach to iron ore exports evolve, S&P foresees “significant seaborne iron ore trade surpluses to emerge from 2026.” This will happen mostly on account of the planned commissioning of shipments from the Simandou greenfield project of ore of exceptional quality starting November 2025. Located in south-eastern Guinea, the project area has an estimated reserve of 2.4 billion tonnes. What makes Simandou extraordinary is that its ore has an iron bearing of 65% and more.
Experts think that the project, as production is gradually ramped up, has the potential to reshape the global iron ore market, giving China a leverage in global price determination. The project is divided into four blocks: Block 1 and 2 are developed by Winning Consortium Simandou with Singapore based Winning International Group, China Hongqiao Group and United Mining Suppliers as partners. Simfer joint venture, including Rio Tinto, Chalco Iron Ore Holdings and government of Guinea is developing block 3 and 4.
Driven mainly by Chinese companies with support of Beijing, their involvement goes beyond opening and running of Simandou mines to constructing a 622 km rail line connecting mining site to a new deep-water port facilitating exports primarily to China. At its peak capacity use, the project will annually yield 120 million tonnes of iron ore in which the respective share of China and Rio Tinto will be in the 75:25 ratio. In all likelihood all other ore producer-exporters will be encountering a “competitive threat” from high quality BF and DRI (direct reduced iron) friendly Simandou ore.
In order to counter the emerging threat, Rio Tinto has decided to use a portion of its share of Simandou ore for blending with supplies from Australia’s Pilbara region. When will Simandou be producing and exporting at the optimum level? More than one timeline has been doing the rounds. S&P, however, says considering the challenges linked to building “transportation infrastructure… we have cautiously estimated that (Simandou) exports will reach 100m tonnes only by 2029.”
Whether it is iron ore or bauxite on whose big volume imports China is destined to remain permanently dependent has been early to identify several African countries for investment in their rich mineral resources. The strategic consideration of building alternative sources of minerals supply from Australia, whose security related moves, particularly involving Quadrilateral Security Dialogue led Beijing not only to acquire offshore iron ore and other mineral assets but also make investment in related infrastructure such as road, rail line and deep water port.
Simandou is a result of that and Guinea has also emerged as a major source of supply of bauxite (of high AI2O3 content) to China ahead of Australia. China’s economic diplomacy that includes Belt and Road Initiative is turning out to be a major enabler for industrial raw materials, including iron ore security. As China’s future iron ore procurement strategy unfolds with new suppliers like Guinea coming on board, shipments from Australia and Brazil will count, maybe to a lesser extent.
S&P says, while shipments from Australia are to rise from an estimated 905m tonnes in 2025 to 917m tonnes by 2029, the uptrend will then be reversed due to depletion in mines and falling ore grades to settle again at 905m tonnes. Will there then be an occasion to make adjustments to the specifications of the 62% Fe IODEX price benchmark to reflect quality deterioration in Western Australian iron ore! Brazil, in the meantime, aided by significant investments at Carajas mines owned by Vale SA will be gradually stepping up ore exports from an anticipated 393m tonnes to 444m tonnes by 2035. As the steel industry is operating mostly in low margin environment, the mills are inclined to consume lower grade ore supported by alternative blending strategies. That way steelmaking cost is curbed.
At the same time, in spite of all the mitigating steps taken so far to clean up steelmaking operations in and outside China, the industry still accounts for 11% of global carbon emissions and 7% to 9% of greenhouse gas emissions. Expectedly, pressure is mounting on the industry everywhere to decarbonise operations. Like in aluminium, consumers are showing preference for green steel. Production of such steel will demand use of high grades of iron ore and DR (direct reduction) pellets. Then the carbon border adjustment mechanism provides incentive for commercialisation of low emission production system.
The industry, therefore, is on the horns of a dilemma: Low steel margins create compulsion for use of low grades of ore. As against this, making steel that leaves comparatively low carbon footprint will demand feeding BFs with high grades of ore whose supply from Australia is falling. President Trump’s fiddling with tariffs targeting all nations has brought to the fore geopolitical risks that iron ore faces. China has been early to take protective steps from the risks of sudden disruptions in iron ore supplies. (IPA Service)
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