India turns down NMDC's China ore export, sees steel self-sufficiency

India secured the third position globally in 2022, in iron ore production, up 2% from the year before. Over the five-year period leading up to 2021, India demonstrated a consistent 5% Compound Annual Growth Rate (CAGR) in production, and a modest CAGR of 0.57% is estimated from 2022 to 2026. Contributing 10% to worldwide output, India trails behind top producers Australia, Brazil, China, and Russia. Important iron ore producers within India include NMDC, Tata Steel, and Vedanta Resources, with NMDC witnessing a substantial 30% surge in output during 2020-2021.

Recently, the Indian government has rejected NMDC Ltd proposal to export iron ore to China, the world's leading consumer of the commodity. According to the sources, the government has directed NMDC, India's largest state-owned iron ore miner, to prioritise domestic sales. Approximately 80% of India's total iron ore exports are destined for China. India predominantly exports lower-grade iron ore, characterised by an iron content below 58%, with the majority of shipments directed towards the Chinese market.

China's demand for steel is high and the India's government has instructed NMDC to concentrate solely on the country's domestic market. Even though the Indian government forbade NMDC from exporting its ore to China directly, the business still holds local auctions for its ore, with private exporters then selling the ore to China.

Iron ore is a significant feedstock, with China using the bulk commodity only for steel-making. Incidentally, India competes with China in global markets in finished steel offerings like hot rolled coils. Iron ore prices have defied investors’ hopes and climbed significantly, by almost two-fifths since May 2023, primarily because China - despite global anticipation - has not gone ahead with production cuts in steel-making. 

Long-term export agreements between NMDC, Korea, and Japan have already been terminated. The government-backed company, NMDC, is eager to obtain a block as the government's applicant, but the sources stated that the corporation does not intend to bid at the current national auction of key minerals. However, NMDC is in negotiations for a licence to investigate and extract lithium. 

The biggest iron ore producer in India is NMDC. Since its establishment, the Ministry of Steel has governed the corporation administratively. It has been exploring a variety of minerals in some of the most isolated regions of the nation, including copper, rock phosphate, limestone, magnesite, diamond, tungsten, and beach sands.

China and India's bilateral relations have been tense, especially since a border battle in 2020 claimed the lives of 20 Indian soldiers and 4 Chinese soldiers. Along their Himalayan border, Indian and Chinese soldiers engaged in combat at least twice more in 2022.