A sudden spurt in demand from China may have lifted the spirits of Goa’s miners, but iron ore exporters fear it may be purely temporary. Goa accounts for nearly 40 per cent of the country’s total exports, but most companies here are yet to resume production in spite of the recent spurt in Chinese demand.

Mining companies are now using the spurt in sales to reduce stockpiles and inventories, and do not plan to increase production of ore. This year, the state faced its worst slide in demand ever. Iron ore exports, which stood at 30.05 metric tonnes (MT) in 2006-07 and 33.13 MT in 2007-08, plummeted to a mere 9.5 MT in the first six months of the present financial year.

However, demand picked up once more in November and has held steady in early December, during which period the state exported nearly 17 MT to China. This happened after the central government announced the abolition of export duty on low grade iron ore fines, while duty on high grade lumps was cut to 5 per cent. The industry, however, feels this boom is likely to fade soon.

Chinese companies, which follow a calendar financial year, are busy working on their year-end balance sheets, therefore there is an urgency to correct accounts, leading to the mini-boom. The situation is expected to lapse to pre-November lows by late January, feel most exporters.

After the export duty was cut, Goan companies were able to compete on spot prices with Australia. Ore prices witnessed a steep fall from an average of $130 a tonne to $40 a tonne in 2008. Currently, rates are in the range of $55 to $70 a tonne.

The Goa Mineral Ore Exporters Association (GMOEA) says that nearly 40 steel units in China have shut down. Those still operating are taking advantage of low ore prices to opt for high-grade ore rather than Goa’s low-grade variety, to cut energy costs. What is worse, the GMOEA expects demand from Japan to also drop in the next few months. Japan accounts for approximately 9 million tonnes of the state’s exports.

The ongoing decline in mining activity is expected to hit employment levels in the state, especially in Goa’s interior rural areas. According to a recent government survey, Goa’s 103 working mines provide livelihoods – directly and indirectly – to nearly one lakh people.