MUMBAI (Commodity Online): The government’s decision to hike the export duty on iron ore has exulted steel producer on the Indian bourses as the leading steel maker, Ispat Industries Ltd (BOM: 500305) zoomed by over 5.5% on the Bombay Stock Exchange (BSE) today.

Iron ore is a key ingredient in manufacturing steel. India's steel industry has been lobbying the government to restrict India's iron ore exports to ensure supplies of the raw material are not exhausted in the near future.

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In a recent notification released by the Finance Ministry, the government has raised export duty on iron ore lumps to 10 % from 5% and on iron ore fines to 5% from nil.

Key steel stocks led by Ispat Industries, which rose by 5.5% to Rs.21.80 during the market hours on the BSE have posted moderate to heavy gains today. Similarly, Tata Steel Ltd (BOM: 500470) and Steel Authority of India Ltd (SAIL) (BOM: 500113) gained over 1% each to Rs.626 and Rs.239.60 respectively.

However, iron ore exporter, Sesa Goa Ltd (BOM: 500295) posted negative returns on the bourses today as the imposition of duty would restrict the company’s iron ore exports, thereby hamper the company’s profitability.

Domestic steel makers, faced with input shortages in coking coal and natural gas, had sought higher export taxes on iron ore to ensure supply as India is the third largest exporter of iron ore.

The country produces about 200 million tonnes of iron ore, of which about 50 % is exported. Nearly 80% of India's iron ore exports go to China and the balance to South Korea and Japan.

The iron ore exports more than doubled in October 2009 to 9.32 million tonnes from 4.26 million tonnes a year ago, largely due to a pick-up in Chinese demand.

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