The recent spurt in iron ore prices are unlikely to sustain for long on estimated decline in global steel production and consumption, said Seshagiri Rao, Joint Managing Director and group Chief Financial Officer of India’s No. 3 steel producer JSW Steel in the sideline of a steel seminar here on Tuesday.
Iron ore prices have increased over 10 per cent so far this month mainly because of a rise in Ocean freight rates and not purely on a recovery in demand. Prices of iron ore having 63 per cent iron content increased from $48 a tonne to $54 a tonne.
According to industry sources, iron ore imports into China, the world’s largest steel producer and consumers, has increased substantially, most of it is coming from Australia.
But, a rise in freight rates has lured Chinese importers to turn towards India for ore procurement. India has a strategic advantage over other iron ore majors including Australia and Brazil which entails one-fourth of the freight cost of its competitors.
According to the latest estimates by the World Steel Association, global steel production is likely to decline by 15 per cent this year. Developing countries may lead the recovery in both economies and steel demand to follow developed economies next year.
During 2009, developed economies including the US may not see any recovery in economy, an analyst said.
Global steel production witnessed a de-growth of 22.8 per cent in the first quarter of the current calendar year from a decline in 1.55 per cent in 2008 and a staggering growth of 8 per cent last year.
Similarly, world steel consumption nosedived by 14.87 per cent in the first quarter of the current calendar year as compared to a meagre 1.97 per cent slump in 2008 and a growth of 7.29 per cent during last year. World average monthly crude steel production was recorded at 87.884 million tonnes in the first quarter of 2009, a decline of 23 per cent from 113.843 million tonnes in the corresponding quarter last year.
