The global financial turmoil and reduced demand for steel products in Europe has adversely affected the prospects of Indian iron ore exporters to China. Despite shortage in supply of iron ore from Karnataka and Orissa, prices of Indian-origin iron ore in Chinese markets have dropped to $168 a tonne, as against $191 a tonne about 15 days ago, declining 12 per cent.
“Both Chinese steelmakers and traders expect the market to further drop due to the global financial turmoil and reduced demand. After the week-long national holiday in China, prices fell $6 on a single day and finally settled at around $168 a tonne, compared to $178 a tonne a week ago. The major reason is the global sell off in bullion and the overall negative sentiments for commodities across the board,” said Praveen Kumar, chairman, Maya Iron Ores, a commodity broking company.
He said prices have fallen sharply in the last one week in China and the high grade iron ore fines (63 iron content and above) are now ruling at $168 a tonne and the low grade (53-54 iron grade) are trading at $98 a tonne. The prices are likely to hover around $150-160 a tonne in the next couple of months provided the global financial markets stabilise.
“The sentiment among Chinese buyers is very low at this moment. Despite buying a record quantity of 60 million tonnes (mt) in September, the Chinese buyers are lying low for now,” Kumar said. He added that the government action in Karnataka and Orissa resulted in the rise in prices. But, they are now falling due to global sentiment, he said.
Iron ore stockpile in china posted a decrease after several weeks and stood at 93 mt approximately. Indian stockpile continued its decline with current stock level of around 12 mt across the major ports.
Due to the lack of material availability and reduced price advantage, Chinese mills have ventured to other countries like South Africa and Chile for iron ore procurement. “Indian iron ore currently has a Chinese market share of 27 per cent, which if the Indian government does not take swift measures to normalise the export segment, can considerably reduce in the following years,” Kumar added.
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Meanwhile, the Federation of Indian Mineral Industries (Fimi) expects export of iron ore from India to come down this financial year to around 70 million tonnes, against 97.6 mt exported last financial year, declining 28 per cent. The drop is mainly due to shortage in supply from states such as Goa, Karnataka, Orissa and Jharkhand. In 2010-11, India’s iron ore exports stood at 97.5 mt.
“The ban on export of iron ore in Karnataka and shortfall in Goa along with problems in eastern states have compounded the problems for iron ore exporters. We don’t see any hope for the sector in the next few months,” R K Sarma, secretary general, Fimi told Business Standard.
For the first four months of the current financial year, iron ore exports from India have dropped 22 per cent to 25.29 mt, as against 32.36 mt. “Karnataka largely exports low-grade iron ore to China and for the past one year there have been no exports because of the ban by the Karnataka government. Until the matter is resolved in the Supreme Court in favour of exporters, we cannot hope for resumption of exports from Karnataka,” said D V Pichamuthu, director, south, Fimi.