MARKET ANALYSIS OF IRON ORE

MARKET ANALYSIS OF IRON ORE

CONTENTS

CHAPTER 1. (1) Executive Summary (2) Objective (3) Methodology (4) Limitations

CHAPTER 2. (1) Company Profile (2) History of MMTC (3) Corporate Mission (4) Business of MMTC (5) SWOT Analysis of the company

CHAPTER 3. (1) Iron Ore (2) Industry Profile (3) Iron Ore Industry in Australia (4) Global Steel Scenario (5) Indian Steel Emerging Scenario (6) World Iron Ore Market (7) Trade Policy : Iron Ore (8) Indian Iron Ore Logistics (9) Indian Iron Ore Competitive Benefit (10) SWOT Analysis Indian Iron ore Market (11) PESTLE Analysis of Indian Iron Ore Market (12) MMTC Export to China,Japan,South Korea (13) Documentation: In Context of export (14) Methods of Payment

CHAPTER 4. (1) Findings and Analysis (2) Recommendations (3) Bibliography

CHAPTER:1

EXECUTIVE SUMMARY

The project report has been prepared on iron ore market. The report starts with the organizational profile of the company under study i.e. MMTC Limited and description of its various businesses. There after a brief overview of the Iron ore and its uses. Industry profile is included in this project which includes global and Indian scenario of steel market and the Iron Ore market.

The next section contains information related to Iron Ore exporting strategies in China, Japan and South Korea. It also lists information about the various documents involved with the company exporting to other countries. This part is the essence of the project as the objective was to learn and gain practical knowledge about the various aspects of Export procedures and Documentation in the division.

The concluding section consists of the findings and analysis and recommendations.

OBJECTIVE

To study about the various businesses of MMTC inBrief

To study about the IRON ORE market in India

To study in brief about the WORLDs IRON ORE market

To study in brief about the STEEL industry for which IRON ORE is used.

To study about the strategies adopted by the iron ore division of MMTC for exporting in different countries China, Japan ,and South Korea

Gain Practical knowledge about the various aspects of export procedures and Documentation in IRON ORE division of MMTC Ltd.

METHODOLOGY

Analysis is based on secondary data using pie charts , graphs , etc comparison of past figures for couple of years.

Quantitative methods are used for data analysis based on study of statistical data.

Literature Survey for Iron Ore was done from various different facts, figures and Data from varied sources.

LIMITATIONS

This study is based on secondary data hence, the information provided in the report might not be accurate.

The feedback taken from various departments of the organization was biased; hence no conclusion can be drawn from the feedback.

Data for the current financial year was unavailable.

The information provided in the report shows the current scenario of IRON ORE and does not helps in depicting its future and its uses in the coming years.

CHAPTER:2

COMPANY PROFILE

HISTORY OF MMTC

The company was incorporated on 26 September 1963 at New Delhi and became functional on 1st October .The main objective of the company was export of mineral ores and import of essential metals. After independence the government decided to authorize the mining of scarce mineral resources to the public sector rather than private sector. The MMTC has its origin in the 1950s, when the Indian government, with the aim of boosting agricultural and industrial development, determined to earn valuable foreign currency through the export of canalized mineral ores, which the country had huge deposits of. As a consequence of Governments decision to earn foreign currency, the State trading corporation of India (STC) was founded in 1956, as a wholly owned government subsidiary, to manage the exports and imports of selected commodities.

However the need for a specialized institution was felt for handling complexities of mining, transporting and exporting large amount of mineral ore. In 1963 the MMTC was created specifically to trade in minerals and metals and in particular which it began to purchase from the governments mining company called National Minerals Development Corporation and other public and private sector mining companies.

Gradually MMTC diversified into new areas over the years gaining responsibility for importing non ferrous metals, fertilizers and raw materials .But in 1963 the MMTCs primary responsibility was to oversee iron export, formerly the responsibility of the State Trading Corporation of India.

The MMTCs interests in 1990s cover every part of Indias economy related to foreign trade . Its principal activities remain the export of primary and manufactured products but also involve importing industrial commodities such as ferrous and non-ferrous metals , fertilizers and fertilizer raw materials ,third country trading ,which means importing a product from a foreign country and selling it to a third country at a profit without importing the commodity into the trading country ,countertrade, acting as an agent and representative for domestic producers, domestic trade in bulk raw materials, shipping, financing, transporting and warehousing services for Indian exporters, services for Indian exporters , services for Indian Exporters , and entering into joint ventures in mining, transportation,manufacturing , trading and the building of infrastructures.

CORPORATE MISSION

As the largest trading company in India and a major trading company in Asia. MMTC aims at improving its position further by achieving sustainable and viable growth rate through excellence in all its activities, generating optimum profits through total satisfaction of shareholders,customers,suppliers,employee and society.

CORPORATE OBJECTIVE

1. To be a leading international Trading house in India operating in the global trading environment, with focus on BULK as core competency and to improve returns on capital employed.

2. To retain the position of single largest trader in the country for product lines like minerals, metals, and precious metals.

3. To promote development of trade-related infrastructure.

4. To render high quality of services to all categories of customers with professionalism and efficiency.

5. To provide services to the medium and small scale sectors

6. To upgrade employee skills for achieving higher productivity.

BUSINESS OF MMTC

MINERALS

MMTC Limited continues to be the countrys leader in mineral exports for over four decades now. MMTCs performance in mineral trade has been acknowledged by the CAPEXIL (Chemicals and Allied Products Export Promotion Council) by conferring the nations highest award for excellence in minerals exports 20thtime in succession. During the last decade, MMTC could withstand the stiff competition in the world market by its continuous and persistent efforts in diversifying its markets apart from retaining existing customers, enlarging its product range, expanding extensively its infrastructure facilities and by attaching utmost care and importance to its trade commitments as also the quality of service and products.MMTC has been consistently striving to enhance its competitiveness in the area of value addition. MMTC has provided further fillip to value addition of minerals. MMTCs co-promoted 1.1. million tpa Neelachal Ispat Nigam Ltd. (NINL) consumes over 2.2 million tons of various types of minerals on annual basis being supplied by MMTC and others.

METALS AND INDUSTRIAL RAW MATERIALS

MMTC imports following metals as per LME deliverable specifications and also Non LME grade material according to the requirements of their customers:

1. Non-Ferrous Metals:Copper in the form of Wire bars, Cathodes, CC rods], Aluminum in the form of Ingots and Wire rods], Zinc Ingots , Spl. HG , Lead Ingots , Tin Ingot, Nickel

2. Minor Metals:Antimony, Silicon ,Magnesium , Mercury .

3. Industrial Raw Materials, Noble metals and Ferro alloys.

PRECIOUS METALS, GEMS AND JEWELLERYMMTC Limitedis one of Indias Premier bullion trader, handling more than 170 MTs of Gold & 1100 MTs of Silver during 2011-12. The Precious Metals Division has consistently contributed significantproportion of the total turnover of the Company.

MMTCs Precious Metals Division is in to a range of activities covering imports, exports and domestic retail trade. It helps in promoting exports from India by holding exclusive foreign exhibitions of gold and studded jewelry at chosen overseas locations.

MMTC is an authorized agency of the Government of India for import of gold, silver, platinum, palladium, rough diamonds, emeralds, rubies and other semi-precious stones and supplies these items to jewelers in India for domestic sales and exports. It is one of the custodians of the Diamond Plaza Customs Clearance Center in Mumbai. MMTC is also the custodian for import & export of precious cargo at SEEPZ, SEZ Mumbai.

The company also operates in-house assaying and hallmarking units at New Delhi, Ahmadabad, Kolkata and Jaipur for testing purity of gold and gold articlesduly accredited with Bureau of Indian Standards.

MMTC has a unit in New Delhi for manufacturing its own brand of gold and silver medallions since the year 1996. Customized requirements for corporate/institutional orders are serviced from here throughout the year. MMTC hasretail jewelry & its own brandedSterling Silverware (Sanchi) showrooms in all the major metro cities of India. MMTC also supplies branded hallmarked gold and studded jewelry.

AGRO PRODUCTS

MMTC Limited is a global player in the Agro trade, with its comprehensive infrastructural expertise to handle agro products. MMTC Limited provides full logistic support from procurement, quality control to guaranteed timely deliveries of agro products from different parts of India through a wide network of regional and port offices in India and its contacts abroad.

The agro trade primarily depends on Govt. policies and vagaries of monsoon. At times when the surplus agro products are available in the country, the export opportunities emerge while in the period of shortages the agro products need to be imported. The Agro Group of the company shall continue to pursue plans and strategies to meet the shortages of edible oils, food grains & pulses in the country by imports and export of surplus availability of agro products like Wheat in the country. The group is geared up to meet the challenges stemming from wide variations in quantity/ product range available for imports/ exports besides broadening the commodity profile to ensure future sustainability of business growth.

FERTILIZERS AND CHEMICALS

MMTC Limitedhas remained one of the largest importers of fertilizers in India. It is engaged in the import of both finished, intermediate and raw fertilizers. MMTC handles more than two million tons of fertilizers. It continues to remain a trusted and reliable supplier of fertilizers to many institutional customers in India. This has been possible owing to a reputation of trust and reliability assiduously built by the company over four decades.

As a result, MMTC remains the single unique window for buying and selling of all fertilizer products globally. We would like to assure all our valued business associates across the globe a most transparent, efficient and effective trading experience in fertilizers.

COAL AND HYDROCARBONCoal and Hydrocarbon is identified as one of the core areas of business for MMTC and Steam coal is identified as a thrust product for import. The coal and hydrocarbons business has achieved a turnover of Rs 18390 million in 2004-05. The above turnover is comprised of mainly LAM COKE, Coking Coal and steam coal.During 2004-05 MMTC transacted a business of around 1.10 million tons of Coking Coal, 0.50 million tons of LAM COKE and 1.39 million tons of steam coal. A quantum jump both in value and quantity of coking coal and non-coking steam coal total6 million tons valued at Rs.2500 Million - is expected during 2005-06.MMTC withstood the stiff competition due to its continuous and persistent efforts in diversifying its markets, offering value added products and services to its existing customers, enlarging its product range and customer base, expanding extensively its infrastructure facilities, using its expertise in trading by attaching utmost care and importance to its trade commitments as also the quality service and product.Certain specific strengths of MMTC, which make it a strong player in this sector are :1. Strong business relationship with the leading coal mines and reputed suppliers of various coal and hydrocarbon products. A list of suppliers whose credentials are established are also updated from time to time. They are retained by MMTC for sourcing.2. Elaborate infrastructure facilities for bulk handling with arrangements for rail and road transport, warehousing, port and shipping operations, which gives MMTC complete control over trade logistics.3. One of the biggest International traders in bulk in the country.4. Importing non-coking steam coal continuously for the power plants under long-term contracts.Major End Users Of Coal And Petroleum Products

PRODUCTSEND USES

Non Coking (Steam)Power Plants, Cement, Paper Industry

Coking CoalCoke Oven Batteries / Steel Industry

NaphthaPetrochemicals / Fertilizers

LAM CokeSteel Industry, Foundries

Furnace OilPower, Fertilizer Plants

BitumenRoad Paving / Insulation / Paints

MMTC is catering to the requirements of various customers, inclusive of State Electricity Boards and Power Utilities. Currently there is big gap between demand and supplies of non-coking coal in the domestic market, which is likely to widen further in 2006-07. Therefore many of the SEBs are importing steam coal for techno-economic reasons. The quality of imported coal is superior with high GCV and lower ash, which leads to lower costs and environment friendly generation of power.MMTC is one of the largest importers of LAM COKE in India. LAM COKE is imported by MMTC for various customers like NINL, SAIL, RINL, KIOCL, and IDCOL and also for some private companies. MMTC imported of LAM coke on a regular basis for MMTC promoted Neelachal Ispat Nigam Limited, Duburi, Orissa. With the commencement of commercial production of Coke Oven by NINL, MMTC has tied up for import of nearly 1.4million tons of coking coal annually for captive consumption at NINL.Concerted efforts are also made to meet the requirements of small customers whose off take is less than shipload by clubbing similar requirements. Coal Division also organizes financing of import transaction of coking coal and Lam Coke. The Division also undertakes marketing of high quality LAM coke and coal tar produced by Neelachal Ispat Nigam Ltd. The LAM coke produced at NINL has moisture content of 1% maximum, compared to 4- 5% moisture in normal coke, which is due to dry quenching process.

SWOT ANALYSIS

STRENGHTS OF THE COMPANY

monetary assistance provided

reduced labor costs

experienced business units

barriers of market entry

existing distribution and sales networks

WEAKNESS OF THE COMPANY

-Being a government company, decision making process is low

-The resources are not properly utilized

-For every detail they are accountable to the Government of India

-Being a government company, it avoids taking risks thereby foregoing some profitable opportunities.

-Products are not aggressively marketed as in the private sector

OPPORTUNITIES TO THE COMPANY

-Being a state trading enterprise, they can access various international markets.

-In the liberalized era,MMTC Ltd. can deal in any bulk commodity.

-In the booming international market,MMTC Ltd can invest in resourcing major minerals.

THREATS TO THE COMPANY

-Economic conditions affect demand/supply

-Price conditions in the domestic and overseas market in which the company operates changes due to Government regulations, tax laws ,other statues and incidental factors.

-Competitors are also a major threat to the company.

CHAPTER:3

IRON OREIron oresarerocksandmineralsfrom whichmetallicironcan be economically extracted. Theoresare usually rich iniron oxides and vary in color from dark grey, bright yellow, deep purple, to rusty red. The iron itself is usually found in the form ofmagnetite(Fe3O4, 72.4% Fe),hematite(Fe2O3, 69.9% Fe),goethite(FeO(OH), 62.9% Fe),limonite(FeO(OH).n(H2O)) orsiderite(FeCO3, 48.2% Fe).Ores containing very high quantities of hematite or magnetite (greater than ~60% iron) are known as "natural ore" or "direct shipping ore", meaning they can be fed directly into iron-makingblast furnaces. Iron ore is the raw material used to makepig iron, which is one of the main raw materials to makesteel. 98% of the mined iron ore is used to make steel.Indeed, it has been argued that iron ore is "more integral to the global economy than any other commodity, except perhaps oil".

(HEMATITE: The main iron ore of Brazilian Mines)

SOURCES

It is estimated that worldwide there are 800 billion tons of iron ore resources, containing more than 230 billion tons of iron. Among the largest producing iron ore nations are Russia, China, Australia, and India.

USES

Almost all of the iron ore that is mined is used for making steel. Raw iron by itself is not as strong and hard as needed for construction and other purposes So, the raw iron is alloyed with a variety of elements(such as tungsten,manganese,nickel,vanadium,chromium) to strengthen and harden it, making useful steel for construction, automobile, and other forms of transportation such as trucks, trains and train trucks.

SUBSTITUTES AND ALTERNATIVE SOURCES

Though there are no substitutes for iron, iron ores are not the only materials from which iron ore and steel products are made. Very little scrap iron is recycled more than 1-1/4 times as much tonnage as all other materials combined.

INDUSTRY PROFILE

Review of the literature on the industry

Iron & Steel is the crux for industrial development in a country. The vitality of iron steel industry largely influences the economic status of a country. The vitality of iron steel industry largely influences the economic status of a country. Iron ore being the essential raw material for iron steel industry, its mining arguably is the cynosure of all mining activities undertaken by any country.

India is endowed with rich resources of iron ore in quantitative terms. The iron ore resources as on 1.4.2010 are as under:

Type of ore (Qty Million tons)Hematite 17.882

Magnetite 10.644

Total 28.526

RESOURCES

Magnetite and Hematite are important iron ore in India. Magnetite ore deposits are about 92% which are found in the southern sector especially in Karnataka. Hematite ore deposits are about 59% which are found in eastern sector.

As per UNFC system, the total hematite resources as on 1.4.2010 are estimated at 17,882 million tones of which 8,093 million tones are under reserves category and the balance 9,789 million tons(55%) are under remaining resources category. Hematite resources are located in Odisha-5930 million tons,Jharkhand-4597 million tons,Chattisgarh-3292 million tons,Karnataka-2159 million tons and Goa-927 million tons. The balance resources of hematite are spread in Andhra Pradesh, Assam,Bihar,MadhyaPradesh,Maharashtra,Meghalay,Rajast-han and Uttar Pradesh. Magnetite is another principal iron ore that also occurs in the form of oxide, either in igneous or metamorphosed banded magnetite silica formation, possibly of sedimentary origin.

PRODUCTION

The production of iron ore constituting lumps,fines and concentrates was at 167 million tones in the year 2011-12,showing decrease of about 19% as compared to that in the preceeding year,mainly on account of suspension of mining operation in Karnataka due to Honble Supereme Courts order.

Among them,260 mines are in the private sector and 34 mines in public sector . Contribution of public sector to the total production was about 33.3% as against 29% in the preceeding year.The remaining 66.7% of the total production in 2011-12 was from private sector.Among 34 public sector mines,13 mines (5 in Chattisgarh,4 in Odisha,2 each in Jharkhand and Karnataka) each producing more than one million tones annually accounted for 93.4% of the total output in public sector and 31.1% of the total production in the country during 2011-12.Out of 260 iron ore mines and 24 associated mines in private sector,30 iron ore mines(17 in Odisha,9 in Goa, and 4 in Jharkhand)each producing more than one million tons annually accounted for about 67.2% of the total output of private sector and about 44.8% of the total iron ore production.

IRON ORE INDUSTRY IN AUSTRALIA : FACTS

FACT #1:IRON ORE HAS CONTRIBUTED MORE THAN $70 BILLION IN ROYALTIES AND COMPANY TAX SINCE 2007/2008.

FACT #2:

IRON ORE EARNED AUSTRALIA $75 BILLION IN EXPORTS IN 2014.

FACT #3:IRON ORE DIRECTLY EMPLOYS AROUND 60,500 AUSTRALIANS.

FACT #4:

50 COUNTRIES PRODUCE IRON ORE AND AUSTRALIA ACCOUNTS FOR 30% OF GLOBAL PRODUCTION.

FACT #5:AUSTRALIA IS THE WORLDS 2NDBIGGEST IRON ORE PRODUCER AND LARGEST EXPORTER.

FACT #6:AUSTRALIA IS THE LARGEST IRON ORE EXPORTER WITH MAJOR MARKETS BEING CHINA, JAPAN AND KOREA.FACT #7:

RIO TINTO & BHP BILLITONS IRON ORE MARKET SHARE HAS REMAINED STEADY FOR 10 YEARS.

FACT #8:IRON ORE PRICES STILL WELL ABOVE THE LONG-TERM AVERAGE.

FACT #9:

$5.22 BILLION PAID TO WA IN STATE ROYALTIES FOR IRON ORE IN 2014.

FACT #10:

IRON ORE MAKES STEEL, ESSENTIAL TO OUR MODERN WAY OF LIFE.

GLOBAL SCENARIO OF STEEL

Global crude steel production reached 1.58 billion in 2013 driven by growth mainly in China.

China continued to lead the increase and the production over 49% of the world crude steel production.

During 2013crude steel production in China was 779mt as 724 mt in 2012, a growth of 7.5%.

Rest of the world showed increase of 3.5% over the previous year(i.e from 1.52 billion during 2012 to 1.58 billion in 2013)

India registered impressive growth of 5.1% in steel production in 2013 as compared to 2012(i.e from 77.2 mt in 2012 to 81.2 in 2013)

INDIAN STEEL EMERGING SCENARIO

Indian crude steel production from 2010-2013

2010-112011-122012-13

Steel Production72.276.781.2

Growth in %64.35.1

(Quantity in million tons)

With above increase in FY 2010-11, India is the 4th Largest producer of steel in the world.

India remains the 4th Largest producer of steel in the world in FY 2012-13

During 2012-13, India finished steel production at 81.2 million tons, a growth rate of 5.1 % over the last year.

WORLD IRON ORE MARKETPRODUCTION

Iron ore demand is increasing because of increase in steel demand worldwide. Steel is used in various fields such as infrastructure, for daily use products etc. It is but obvious that steel demand will increase in the near future ultimately leading to increase in the demand of Iron ore as it is used in the production of steel .

Five major crude steel producing countries are as follows:-China 779 million tonesJapan 110 million tonesUS 86.9 million tonesIndia 81.2 million tones

The output of IRON ORE has increased mainly in three countries namely China, Japan, and India

Percentage change in the growth rate from 2012 2013

China 7.5% Japan 3.1%India 5.1%

It is being predicted that world iron-ore market would be characterized by tight conditions over the short run, but then the supply would gradually catch up with demand and the prices would decline from the current level , although they would stay higher than in the period before 2010.

TRADE POLICY:IRON ORE

The present trade policy permits exports of Iron Ore from GOA to all destinations by the iron ore producers, irrespective of the Fe content. K IOCL is the state trading enterprise for its own products (iron ore concentrates and pellets).

MMTC is the state trading enterprise for export of iron ore with Fe content of 64% and above, some types of iron ore from specific areas like BAILADILA mines in Chhattisgarh are allowed to be exported with restrictions on quality, imposed primarily with a view to meet domestic demand.

As per the Foreign Trade Policy (FTP) for 2009-2014 and the amended Export and Import quality incorporated in the FTP, the present export policy for iron ore is furnished below in brief. The imports of iron ore lumps, fines, concentrates and agglomerated pellets are freely allowed.

ITEMSEXPORT POLICYNATURE OF RESTRICTIONS

Iron ore other than those specified under Free CategorySTEExported through MMTC

Iron ore originating from Goa,exported to China,Japan,Europe,South KoreaFREE

Iron ore of Redi origins supplied to all markets , irrespective of the Fe ContentFREE

All iron ores of Fe content up to 64%FREE

Iron ore concentrate prepared by beneficiation and/or concentration of low grade ore containing 40% or less iron produced by KIOCL Ltd.

STEExported through KIOCL Ltd , Bangalore

Iron Ore pellets manufactured by KIOCL LtdSTEExported through KIOCL Ltd , Bangalore

Rejects of iron ore chips and like generated from the manufacturing process after using imported raw material.FREEThe quantity of such rejects shall not be more than 10% of the imported raw materials.

INDIAN IRON -ORE LOGISTICS

Logistics is the management of the flow of goods and services between the point of origin and the point of consumption in order to meet the requirements of the customers. Logistics involves the integration of information ,transportation ,inventory, warehousing, material handling, and packaging and often security. Logistics is a channel of supply chain which adds the value of time and place utility.

Following are the major & important modes of iron ore transportation in India : RAILWAY ROAD WATERWAYS

Above all the most commonly used mode for the transportation of iron ore is Railways. Iron ore is moved from mines to steel plants /sponge iron plants/pig iron plants and ports. But in the recent past freight charges have been increased significantly. From Railway Budget 2011, the Indian railways have raised freight rates on iron ore meant for exports by 100 rupees per ton to Rs 1600.

The cost of Logistics for the mines in GOA is the most economical. Iron Ore, Manganese, Bauxite,high magnesia, limestone and clay are the chief minerals of economic importance found in Goa. The mining industry in GOA provides employment to about 11,000 persons directly and about 10,000 persons indirectly.

The main reason behind these mines being the most economical is the availability of lower grade ore , whereas East India mines logistics are cost expensive. There is severe competition on logistics supply from the domestic industry. Karnataka mines logistics cost cheaper than East India mines costs because in Karnataka various ports options are available for the movement of the Cargo.

INDIAN IRON ORE COMPETETIVE BENEFIT

India is the fourth largest producer of quality iron ore in the world after China, Japan and the United States .Iron ore resources are dynamic and increasing from 72.2 million tones in 2011 to76.7 million tones in 2012 and in the year 2013 it reached 81.2 million tones.

There is availability of surplus Iron ore after meeting domestic demand and export requirements. India offers different grades of iron ore lumps, fines and concentrates providing many alternatives to Chinese steel industries to select appropriate quality of ore from India , as far as voyage time is concerned ,it is between 12 and 15 days . India facilitates better inventory management for Chinese steel mills. As far as loading facility is concerned , it is present in 14 ports from the east to the west coasts.Lower sailing time translates into lower financing cost as buyer is out of pocket for that lesser time period.

Purchasing of iron ore from India provides competitive ocean freight vis - - vis Brazil and South Africa. As a result in the recent past the ties have become closer between Indian and Chinese steel mills/traders over last one decade.

SWOT ANALYSIS OF INDIAN IRON ORE MARKET

STRENGTHS

Plenty of iron oreIndia has rich mineral resources; It especially has abundance of iron ore and steel. Therefore, many raw materials are available at a comparatively lower cost.

Availability of labor at lower wage ratesIndia has the third largest pool of technical manpower, next to U.S.A and erstwhile USSR, capable of understanding and assimilating new technologies.

WEAKNESS

High cost of basic Inputs and ServicesHigh administered price of essential inputs like electricity puts industry at a disadvantage; about 45% of the input costs can be attributed to the administered cost of coal, fuel and electricity, eg cost of electricity is 3 cents in U.S.A as compared to 10 cents in India.

Low labor ProductivityIn India the advantage of low cost labor gets offset by low labor productivity ;eg: at comparable capacities labor productivities of SAIL and TISCO is 75t/man year and 100t/man year, for POSCO,Korea and NIPPON Japan the values are 1345t/man and 980t/man year.

Lack of expenditure in R&D

Low quality of Steel and Steel Products

Poor quality of basic infrastructure like road,port etc.

Delay in absorption in technology by existing units.

OPPORTUNITIES

Export market PenetrationIT is estimated that world steel consumption would double in the next 25 years.

This possesses a huge opportunity to the Iron Ore Industry in India as India is rich with Iron ore.

Iron ore demand globally can act as a great opportunity for India.

THREATS

China is one of the major competitor of India in terms of production of Iron Ore.

Chinas dependency on other countries is decreasing as its own production of iron ore is increasing day by day

Technological advancement of competitors

PESTLE ANALYSIS OF IRON ORE

POLITICAL FACTORS:

Domestic players are given more priority by the Government.

Ban of exports of iron ore by Karnataka Government.

MMTC finds it difficult to obtain clearances and leases by state governments.The various clearances are: Department of mines Iron ore contribution to inflation Geographical survey of India Central Board of Excise and Custom Ministry of environment and Forest Ministry of labor Goa state pollution control board Indian Bureau of mines

ECONOMIC FACTORS: Indian Iron ore industry thrives on exports. Goa exports 96% of its iron ore production and 84% if revenue is accounted for by exports to China.

The biggest buyer of iron ore is China, China is the key driver of the global iron ore industry.

The exchange rates fluctuated the impact of performance of mining industry.

In India there is no restriction on foreign equity holdings in mining sector companies registered in India as per mining legislation.

Change is scale of steel production

SOCIAL FACTORS: The problem of mining- induced displaced and resettlement(MIDR) poses major risk to societal sustainability

The closure and suspension of work in more than 50 iron ore mines in Orissa in the past few years has hit supplies for export.

TECHNOLOGICAL FACTORS: There are no exploration programs which can be undertaken by India to locate new additional deposits of iron ore.

There are many improvements made in the technology which has helped the Indian mining industry in cost controlling ,conservation of minerals and in bringing down the alumina content of the ore and emission control.

LEGAL FACTORS:

The central government is consulting with the state government to formulate legal measures for the regulation of mines and minerals in order to maintain the pace of development of mineral resources, in consonance with the national policy goals in order to ensure basic uniformity in mineral administration.

The National mineral Policy in 1993 recognized the need for encouraging private investment, including FDI and for attracting state-of-the-art technology in the mineral sector.

ENVIRONMENTAL FACTORS:

The mining companies have taken up steps in executing the highest standards of quality, environment health and safety(QEHS) management system. All of its mines and their support services are to be compliant with ;ISO 14001-2004 Environment management system,ISO 9001-2000 quality management system and OHSAS 18001-1999 safety and health Management System Compliant.

Development and extraction are interlinked to natural resources like water, forests, land and air. It is very important to manage the precious natural resources and its economical and optimal use as a matter of national importance.

All the mining companies also have to work according to the regulations of the environment protection act.

MMTCs EXPORT TO CHINA,JAPAN AND SOUTH KOREA

CHINA

MMTC started exporting Iron Ore to China in 1989 ,iron ore market had seen a paradigm shift since 2000 with emergence of Chinese industrial Demand ,In the first decade of the 21st Century, China emerged as the largest producer of steel and consequently became the largest buyer of iron ore from MMTC , China is a price sensitive market . MMTC has set of buyers in China who purchase Iron Ore from MMTC . The MMTC follows a tender system in the case of Chinese, the exports of Iron Ore to China are based on spot prices.

JAPAN AND SOUTH KOREA

MMTC is the sole trading company via which the countrys largest state run iron ore miner, NDMC Ltd , routes its exports mainly to Japan. MMTC has been exporting to Japan since 1963.It also exports to South Korea on long term basis. There is a set format while exporting to these countries.

From the year 2010-11, the major Iron Ore suppliers from Australia and Brazil have brought about a marked shift from the annual benchmark price mechanism Prices are decided on a quarterly basis .MMTC follows benchmark for exports of Iron Ore to Japan and South Korea.

DOCUMENTATION:IN CONTEXT OF EXPORT

Documentation is the engine of exports in Global trade.

Documentation facilitates the movement of freight, transfer of title , processing of payments, and custom clearance. Without documentation , the shipment would be at a standstill. Even with the continuing advances in technology playing a greater role in international business, documentation is still required by all parties involved in global trade.

While exporting Iron Ore to various different countries, MMTC involves various different documents required at the time of export, The various documents which at as a pre requisite while exporting IRON ORE are:

CONTRACT OF SALE

A legal contract that obligates the buyer to buy and the seller to sell a product or a service. It involves information regarding commodity ,grade, specification, delivery schedule, price, bonus and penalty, arbitration clause, etc.

SHIPPING BILL

This is the most important document required by the custom authorities for allowing exports. It contains all the details of the shipped goods . MMTC has to pay the export duty on the iron ore quantity declared in the shipping bill.

LETTER TO BANK FOR NEGOCIATION/COLLECTION OF DOCUMENTS

This is a standard letter which gives all the details that could possibly be given to the concerned bank at the time of negotiation of the shipping documents.

INVOICE

A typical invoice contains : A unique Reference number Date of invoice Tax payment if relevant Name and Contact details of the seller Tax or Company registration details of the seller Name and Contact details of the buyer Date of delivering the product

Purchase order number Description of the product Unit price of the product (IF RELEVANT) Total Amount Charged

CERTIFICATE OF INSPECTION

The export inspection agency conducts pre-shipment inspection of the goods notified for compulsory pre- shipment inspection of export goods. The agency issues the certificate of inspection.

CERTIFICATE OF ORIGIN

A certificate of origin states the country from which the goods are being shipped & are made in that country.

CERTIFICATE OF QUALITY

In the context of ISO 9001:2000 certificate , It refers to the issue of written assurance (THE CERTIFICATE) by an independent external body that it has audited a management system and verified that it confirms to the requirement specified in the standard.

SHIPPING INSTRUCTIONS

This document provides a check list of various instructions an exporter may like to give to the shipping agent.

INSURANCE DECLARATION

This document is prescribed by the insurance companies wherein the exporter seeking insurance of the goods makes the declaration with regard to the insurance policy desired and the nature of the goods.

SHIPPING ORDER

This is a reservation slip issued by shipping line at the time of reservation of shipping space for a particular export shipment.

MATES RECEIPT

It is a receipt issued by the mate (Chief Officer) of the ship acknowledging the loading of Cargo on to the ship. This receipt states the condition in which goods are received on the ship.BILL OF LADING

This document is a transport document issued by the shipping line indicating the following:-

1.) Title of goods shipped

2.) Receipt for the goods shipped and an admission to their apparent condition and quality at the time of shipment.

3.) An evidence of the contract of affreightment.

It is transferable by endorsement and delivery. Its possession is equivalent to the possession of goods.

BILL OF EXCHANGE

It is an unconditional written order requesting the buyer to pay a specified amount at a specified time. The Exporter who prepares this order is called drawer. It is also termed as draft in international trade.

1.

METHODS OF PAYMENT

Irrevocable Letter of Credit

MMTC deals with the buyer for payment purpose only through Irrevocable Letter of credit, which is received through banking channels after signing the sale of contract. An Irrevocable express consent of beneficiary ,the issuing bank and the confirming bank .Thus an importer cannot get the terms and conditions of the letter of credit modified/cancelled without the express content of the exporter under the credit provided that all the stipulated documents are presented and these are in strict UCP600 and international standard banking practice. This means that the irrevocable letter of credit is an insurgence against commercial risk to payment.

There are various kinds of letter of credit . But MMTC accepts only confirmed Irrevocable Letter of Credit . An Irrevocable letter of credit is confirmed when another bank adds its confirmation to the letter of credit upon the request or authorization of the issuing bank . Confirming means a definite undertaking of the confirming bank to honor or negotiate a complying presentation. This means that the confirming bank assumes the primary liability for making payment to the beneficiary as if it were the issuing bank. This arrangement is beneficial for the exporter as it enables him to protect himself against the political risks involved in the transfer of funds from importers country to the exporters country.

Confirmation of letter of credit is possible only if there is a clause in the letter of credit which permits the advising bank or any other bank to add its confirmation. Thus if the exporter wants confirmation of letter of credit then he must negotiate for this with the importer so that he can get this clause included in the letter of credit.

Confirmation of credit , in fact , operates an insurance against the political risks to payment .An irrevocable confirmed letter of credit is the most beneficial form of credit for the exporter as he has obtained undertaking of payment from banks namely, the confirming bank.

Once the payment is made by the confirming bank , then it claims the amount of letter of credit from the issuing bank , in case it fails to obtain the payment from the issuing bank for any reason , then it cannot be claimed by the importer from the exporter.

CHAPTER:4

FINDINGS AND ANALYSIS

MMTC is the largest exporter of iron ore from India.

Iron ore resource being finite, the main focus is on increasing productivity in mining and improving infrastructure to enhance capacity & competitiveness.

Proximity between the two countries makes Iron ore import by China from India competitive.

India maintains surplus production of number of grades consistently for export and is expected to remain a dependable source .

Indias steel industry is on the path of major expansion.

India recognizes China as a major consistent importer of Indian Iron ore with stable growth in steel production

Surplus iron ore is available every year even after meeting domestic and export requirements.

With a number of steel projects in pipeline and also in increase of expansion capacities ,the domestic requirement of iron ore is bound to increase in the coming year.

Moreover, with the 5% export duty on iron ore pellets in the budget 2014-15,it is expected to encourage value addition for domestic industry for export.

Government to encourage investment to create additional mining capacity especially for the mines that are lying idle.

Further flow of investment for the purpose of improving infrastructure particularly in Railways, Ports etc which would help in the close monitoring of the iron ore by the government.

The recent development in India during the last few years is increase in steel production and consumption, regulation of export by way of increase in duty, focusing on exports in future mainly to China , who is the largest importer from India.

RECOMMENDATIONS

MMTC has vast experience and network of offices and is capable of handling huge quantities by keeping a proper check.

In case of a single agency like MMTC , which is authorized for export; the existing networks like railways, ports, inland transport etc can be more effectively utilized. This will entail proper movement and lesser demurrage on vessels since this can be effectively monitored .

It is projected that steel productions and consumption in India is going to increase in the coming years. Presently there are large quantities of Iron ore that is exported , and there is no check on the quantity of export of iron ore ;it is recommended that there should be a single agency like MMTC which can directly export iron ore from the country. With this a proper check on quantity can be exercised .

BIBLIOGRAPHY

http://mmtclimited.gov.in http://www.ibm.nic.in/ https://ipcindiansteel.nic.in/ http://www.wikipedia.org/ http://www.steelworld.com/ http://www.dgft.nic.in

Annual Report MMTC -2012-13, 2013-14

IBM Year book 2012.

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