India's government has turned down a request from state-owned iron ore miner NMDC Ltd to export its ore to China, the world's largest iron ore consumer, three sources with direct knowledge said.

The government has instead asked NMDC, India's largest state-owned iron ore miner, to focus on domestic sales, said the sources who didn't wish to be named as they were not authorised to talk to the media.

China accounts for around 80% of India's overall iron ore shipments. India primarily exports low-grade iron ore - with iron content below 58% - and most of India's shipments go to China.

In 2023, China's iron ore imports hit a record high of 1.18 billion metric tons as demand surged and steel exports picked up.

Despite China's buoyant demand, India's government has asked NMDC to focus only on the domestic market where demand for steel is strong, the sources said.

Finished steel consumption hit a five-year high between April and October as construction activity picked up and the automobile sector showed robust demand.

NMDC did not respond to a Reuters request for comment.

Although the Indian government has stopped NMDC from directly selling its ore to China, the company continues to auction its ore locally, with private exporters selling the ore to China.

Bilateral ties between China and India have been strained, especially since 2020, when 20 Indian soldiers and four Chinese soldiers were killed during a border clash.

Indian and Chinese soldiers again clashed at least two times in 2022 along their Himalayan frontier, Reuters reported on Wednesday.

NMDC has already discontinued its long-term agreements with Japan and Korea for exports.

During the 2022/23 fiscal year, India produced 257 million metric tons of iron ore, imported 1.8 million tons and exported 21.6 million tons, according to an industry estimate.

The sources said NMDC does not plan to bid at the ongoing auction of critical minerals in the country but the government-backed company is keen to secure a block as a nominee of the government.

"We cannot compete with aggressive bidding from private players at auctions," one of the sources said.

But NMDC is in talks with the southern state Karnataka for a license to explore and mine lithium, one of the sources said. (Reporting by Neha Arora; Editing by Mayank Bhardwaj and Bernadette Baum)