Global iron ore prices may dip on additional supply from India

Global iron ore prices are expected to see a downward trend in the near-term, with additional supply from India set to drag down prices by around 10 per cent. This follows the lifting of the ban on the commodity’s export from Karnataka.

Lack of effective demand from China, along with the crisis in Japan, will support this trend, with dim chances of an upward bias on the pricing front.

“Additional supply from Karnataka will soften the prices of the commodity to a certain degree in the near-term. It is expected to touch $150 a tonne in two-three months, as against the current level of $165,” said Basant Poddar, vice-president, Federation of Indian Mineral Industries.

 

On Tuesday, the Supreme Court lifted the ban on iron ore exports from Karnataka. The same had been imposed by the state government in July last year to check illegal mining. The ban saw exports from the country decline 18 per cent to 85.4 million tonnes in April-February. Miners expect volumes to spurt in the state as mines become operational after April 20.

“Karnataka is an important state, with nearly 30 million tone of ore produced a year. Around 1-1.5 million tonnes will be produced in the coming few months,” he added.

However, he said the high railway freight charges, along with an export duty of 20 per cent on iron ore fines, would make Indian ore unattractive in the international market.

International iron ore prices saw a correction of around 10 per cent last month due to slackening Chinese demand and the Japanese crisis. According to analysts, there are less chances of an upward movement on the pricing front in such a macro-economic environment.

“Around 81 million tonnes of ore is lying at various Chinese ports. Thus, there are less chances of China building up an inventory in the future. Further, rising interest rates by the Chinese central bank will dampen overall demand. In such a scenario, volume addition will create a demand-supply mismatch, cooling prices further,” said Sandeep Jain, an analyst with Karvy Comtrade. The Japanese crisis had already dampened global demand, he added.

According to reports, contract prices of iron ore have already dipped in the global market, thanks to production cutbacks in Japan, which consumes about 13 per cent of iron ore produced globally. “Demand environment is not supportive of any supply addition in the global market,” Jain added.

However, some industry players have a different opinion on this matter. “Prices may cool down if new stocks come to ports. However, it’s too early to predict the pricing trend,” said Glenn Kalavampara, secretary, Goa Mineral Ore Exporters’ Association.

High railway freight charges, along with export duty regime and volume addition would not be substantial enough to influence prices in global market, he added.