A weaker rupee against the dollar might have been a cause of concern for swelling import bills, but it has come to the rescue of falling iron ore rates, which has been under pressure because of poor demand from China, world's biggest steel maker.
Iron ore rates had declined by six percents in September. During the same period, rupee had depreciated above seven per cent.
“Iron ore export rates for Chine have come down to $165 per tonne, down from $185 a tonne a couple of months ago. Nobody wants to export currently due to the supply crunch. However, the rupee decline has cushioned the fall in the profit margins,” Amalendu Behura, an iron ore exporter from mineral rich town of Sukinda said.
The rupee is currently quoting close Rs 50 per US dollar, much lower than from Rs 44-45 a dollar a month ago. The sudden depreciation of the rupee has been attributed to global financial uncertainty, due to which investors bet heavily on dollar, dumping all other assets such as equities, bonds and commodities world-wide.
“The rupee's decline has certainly covered the losses we would have otherwise incurred due to fall in iron ore rates. But we did not gain much (due to rupee's decline),” said an export broker based at Paradip port.
Iron ore rates slipped during the last week of September, pressurized by slowdown in Chinese crude steel production, which accounts for more than 35 per cent of global steel output.
According to World Steel Association, China crude steel output fell to 58.8 million tonne in August, from 59.3 million tonne in July. In June, it was 59.9 million tonne.
“There is neither any major buyer nor any major exporter in the market now. No big contract has been signed in past two weeks,” said the export broker.
Week long Chinese national festival starting from October 1 is another reason for dull iron ore demand, he added.
All Chinese markets and government offices will be shut till October 7 to observe National Golden Week.
