Who will benefit from India's decision to impose a tax of Rs 300 a tonne on iron ore exports? If indications from markets in China are any hint, Australia is likely to cash in on India's decision to impose the fresh tax.

According to sources, several iron ore traders in China have decided to stop buying iron ore from India after the new tax. Market analysts said the new tax has made Australian ores more competitive.

Indian mining companies estimate the tax proposed last week will halve iron ore exports in the year to March 2008, boosting sales for producers in Australia. The government wants to curb exports to ensure there's enough to meet demand from steelmakers in the country.

The rise in India iron ore rates has increased the appeal of cheaper Australian iron ore. Market watchers said Australia is sitting on the doorstep of the Asian market. Brazil is unfortunately on the other side of the world.

Lower imports from India may raise prices in China, which buys about half of the world's exported iron ore. India sold 74 million tons to China in 2006, 84 per cent of the nation's total.

Australian iron ore accounted for about 40 per cent of the 326.3 million tonnes bought by China last year. Brazil, which sold 76.4 million tonnes, was the second-biggest supplier followed by India. Australia is selling iron ore to China at $20 a tonne cheaper than the Brazil and India.

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