Spot iron ore prices slip below $100 a tonne

For 63-63.5 per cent iron fines, spot ore prices have fallen 19 per cent year-on-year to $95 a tonne, on a free-on-board basis

Iron ore prices have slipped below $100/tonne in the spot market, forcing exporters to rethink their strategies. Now, exporters from Goa are unlikely to rush to bid in e-auctions of the commodity, as it wouldn’t be profitable for them to export at current prices.

For 63-63.5 per cent iron fines, spot ore prices have fallen 19 per cent year-on-year to $95 a tonne, on a free-on-board (FoB) basis. The decline is primarily on account of a fall in demand, as well as a rise in inventory at the ports in China. A year ago, prices stood at $117 a tonne; the previous low was recorded in September 2012 ($96 a tonne FoB).

“Iron ore inventories at the ports in China rose to 113 million tonnes (mt) for the week ended May 9. Disruptions in supply, usually seen during the first three months of the year, weren’t there this year. Also, pig iron production in China was very low in the first three months. As a result, the prices of iron ore have declined,” said Prakash Duvvuri, head of research, OreTeam Research, a Delhi-based iron ore research firm.

The fall in steel demand in China had added to iron ore inventories at the ports in that country, he said. In China, the demand for steel has been slowing since July-August 2013.

Going by current trends, spot prices are likely to decline an additional $10 a tonne by the end of June, owing to an increase in supply of the raw material. It is expected by the end of this year, China will have at least 80-85 mt of excess iron ore.

Due to the fall in prices, export of iron ore from India has become unviable, especially for Goan exporters, as their margins are expected to be Rs 150-200 a tonne. This has forced many exporters to rethink their participation in the e-auctions in Goa. Duvvuri said this was evident during the May 12 auction, as not many exporters had bid for ore at that then.

Also, exporters weren’t sure of how long they would take to secure all the necessary clearances to move the auctioned material. Also, the approaching monsoon will make it difficult to export iron ore.

During the first two rounds of the e-auctions in Goa, 1.6 mt of ore was auctioned. Of this, only about 120,000 tonnes were exported.