Iron ore prices dip 36% in 3 weeks

Slumped to $60-65 a tonne from the recent peak of $112-115 a tonne in August.

Iron ore prices declined the most in three weeks as China, the world’s largest consumer, abstained from active buying in order to clear off existing massive stockpiling.

The steel-making raw material slumped 36 per cent in the last three weeks to settle at $60-65 a tonne on Thurday from the recent peak of $112-115 a tonne in the third week of August.

Spot free-on-board (FoB) price from India is also dependent on the port. Smaller the port, lower the price while larger ports with bigger ship handling capacity attract higher prices. Hence, prices are quoted at $60 at lower port while they go up to $65 at large ports.

“Ore market is in a turmoil now. Earlier, India was exporting to China on regular basis. But now, China is importing from Australia finding their prices competitive,” said RK Sharma, secretary general, Federation of Indian Mineral Industries (FIMI).

In contrast, steel demand from the south-east Asia and the west Asia has revived and therefore, iron ore demand may see a turnaround in near future. But, when will the turnaround happen, we cannot say about it now, he added.

Sharma argued that steel prices in China have declined significantly which indicates that the iron ore demand in the world’s largest steel producing country has declined.

In a bid that could affect export of steel-making raw material, import inquiry from India’s largest importer, China, is very weak with traders insisting on further price cuts.

Adding to that is the delay in the commencement of port activities at Mormugao Port in Goa. Berth 9, which handles 12 million tonnes of iron ore shipment and was scheduled to commence activities on Wednesday, has delayed the activities at least by a week as equipment repair work is still uncomplete.

The procurement of spare parts for the equipment was delayed for about a fortnight, reflecting similar delay in equipment repair work as well. Hence, activities on berth 9 is expected to commence only in the second fortnight of the current month, said Glenn Kalavampara, Secretary of Goa Mineral Ore Exporters’ Association (GMOEA).

This is likely to affect the overall iron ore shipments from India, said an analyst.

China’s iron ore stockpiles of 72.15 million tonnes may not last long looking at the country’s ambitious steel-making plan for 2009. According to the data compiled by China Iron and Steel Association, the country’s crude steel production was running at an all-time high of 1.67 million tonnes in the first fortnight of August which will take the annual production to 610 million tonnes, up 20 per cent from the actual production of 500 million tonnes in 2008.

Therefore, the country may have to return to spot market or sign long-term deal with the price agreed by global suppliers such as Rio Tinto, BHP and Vale, he added.

Meanwhile, many iron ore mines in Goa that got routine environment inquiries from the state government, have successfully obtained clearances. Glenn said that others have also submitted documents as asked by the government and they would get clearances soon.