Weak supply to arrest iron ore price fall, say experts

Iron ore prices which have dipped by nearly 12 per cent in the past two weeks on poor demand, are expected to remain flat for at least two months.

The prices are unlikely to drop further as mine owners are reluctant to sell the mineral at a lower margin, according to industry leaders and exporters.

Due to four-fold rise in export tax at 20 per cent and poor Chinese demand, high quality iron ore prices are currently quoted at $140 per tonne at Paradip port, down from $170 a tonne two weeks back.

“I do not think iron ore rates will slip below $140 a tonne as it will not be viable for exporters and mine owners to sell at a lower rate considering the higher cost of transportation. We are not even ready to sell the mineral at $1 per tonne less than current price levels,” said P C Dash, general manager with J M Buxi & Company, an export broker.

 

“The higher transportation cost of minerals from the producing areas to port was already a burden because of rising fuel prices. The new export tax has clamped the profit margins further”, he added.

Paradip port usually exports about one million tonne of iron ore in a month. However, due to weak demand and poor supply, it is expected to ship only half of the normal amount, said Dash.

Metals and mineral prices dropped soon after the tsunami disaster in Japan, the world’s second largest steel maker and third largest economy.

Though most of the Indian iron ore is shipped to China, traders say, the mineral is then re-exported to other countries, including Japan.

Traders were expecting iron ore prices to go up, anticipating higher trade participation, after the Supreme court lifted the ban on iron ore export from Karnataka, a major exporter.

However, iron ore prices are likely to remain stagnant owing to weak demand for the mineral.

“The export market is dull currently, may be due to higher stocks in China. Prices are seen staying at current levels for at least two months from now. If the reconstruction in Japan takes off soon, there is a chance that the iron ore prices may go up,” said Purushottam Kandoi, president of Odisha Steel Federation.