Indian iron ore miners are risking losing their Chinese market because of sharp price rises, said Luo Bingsheng, deputy director of the China Iron and Steel Association (CISA).

Iron ore imports from India in 2007 rose 6.14 percent, or 4.59 million tonnes, to 79.37 million tonnes compared with the previous year, but the increase was 11.26 percentage points lower than the total import growth of 17.4 percent, or 56.79 million tonnes, Luo said at the China-India Iron Ore Summit on Monday.

China's iron and steel industry has taken action to import more iron ore from countries other than India. Imports from India rose 3.4 percent this February, much lower than the 10 percent and 8.3 percent growth of iron ore import from Brazil and Australia, respectively, CISA statistics show..

"The unreasonable high cost insurance freight (CIF) has already dragged India behind in its competition with Brazil in China," said Luo.

The average CIF of Indian iron ore exported to China reached 157.96 U.S. dollars per tonne in last December, 34.72 U.S.dollars, or 22 percent higher than Brazilian price, resulting in what Luo called "twisted" price relations.

India beats all the other foreign iron ore providers in the Chinese market with a 135.37 percent growth in its average CIF in last December, and its annual average CIF in 2007 soared 53.07 percent, or 34.25 U.S. dollars per tonne year on year, to 98.79 U.S. dollars per tonne, also ranking first in the price growth list.

Luo attributed the surge in CIF to the price hikes in ocean freight. Shipping cost from India to China rose 25.81 U.S. dollars per tonne in the first 11 months of 2007 compared with 2006, taking up 94.7 percent of the total CIF growth.

However, with the average free on board (FOB) in 2007 growing by merely 3.24 percent, India was not the biggest beneficiary of the soaring iron ore price.

Meanwhile, the 10.57 U.S.dollars per ton growth in the average CIF cost Chinese steel makers a combined 839 million U.S. dollars for the Indian iron ore in 2007.

The current iron ore trade between China and India is mainly short-term transactions arranged through traders. It has created an opportunity for dealers to make a huge profit by raising ocean freight charges, according to Luo.

Of the 16.85 million tonnes of iron ore imported from India in the first two months of this year, 98.77 percent was in short-term transactions, CISA statistics showed.

R.K. Sharma, secretary general with the Federation of Indian Mineral Industries, also admitted that it was the dealers, rather than the Indian miners, that benefited most from CIF growth.

"The current trading mode has violated the interests of both the suppliers and the buyers. It has already undermined the competitive edge of the Indian iron ore in the Chinese market, and would affect its future prospects," Luo said.

Wu Jianchang, consultant with CISA saw the future of China and India iron ore trade lying in the establishment of a long-term supply contract based on settlement by international open price issued annually.

"Only in this way could Chinese steel makers arrange long-term transportation contract with the shipping companies, and thus nail the ocean freight," Luo said.

The call from China to tackle the price rise won understanding of the major Indian miners attending the Summit. It was expected that the setting up of a long-term iron ore supply contract between China and India would accelerate the on-going iron ore negotiation between China and Australia.

(Xinhua News Agency April 30, 2008)