By Neha Arora and Rupam Jain
NEW DELHI (Reuters) -The increase in export taxes on iron ore, announced by the Indian government over the weekend, will lead to large surpluses at home, and mainly hit producers of low grade ores that depend on overseas markets, a mining industry body said on Monday.
On Saturday, the government announced that with effect from Sunday export tariffs on new iron ores and concentrates would be raised to 50% from 30%, and duties on pellets would be hiked to 45% from zero. The government also removed import tariffs for coking coal and coke.
Benchmark iron ore futures in China - the world's top consumer of the ore - rose about 7% in early trade on Monday, tracking their biggest daily jump in two-and-a-half months, as India is one of their major non-mainstream iron ore suppliers.
"This is self-defeating, actually, because there will be a lot of stockpiling," R.K. Sharma, secretary-general of the Federation of Indian Mineral Industries (FIMI), said, adding that exports to China were also declining because of low grade quality of Indian ore.
Production by global miners, including BHP, Rio Tinto and Fortescue Metals Group in Australia, has been disrupted by supply-chain snags and pandemic-induced labour shortages, while Brazil's Vale has also had to weather problems.
STEEL EXPORT OUTLOOK DIMS
India, South Asia's third-largest economy, also raised export tax by 15% on eight steel intermediates and scrapped import duty on coking coal, shortages of which have been driving up steel prices. India's top steelmakers body warned on Monday the new exportduty on steel products will "adversely impact" mills that havebeen aiming to boost exports and widen global market sharefollowing Russia's invasion of Ukraine. The world's second-largest crude steel producer churned out a record 120 million tonnes in the fiscal year thatended in March. "The latest policy will dampen fresh investments," DilipOommen, chief executive officer of ArcelorMittal Nippon SteelIndia Ltd (AM/NS India) and president of the IndianSteel Association, told Reuters. AM/NS India - a joint venture between ArcelorMittaland Nippon Steel - believes that the decision to raise the steel export tax would hit the company's 90,000 tonnes of steel exports every month, Oommen said. Separately, Kaustubh Chaubal, vice-president of corporatefinance group, Moody's Investors Service, said the export dutyincrease would raise costs for domestic steel mills.
(Reporting by Neha Arora in New Delhi and Rupam Jain in Mumbai; Editing by Mayank Bhardwaj, Simon Cameron-Moore, Kirsten Donovan)