Iron ore prices gained considerably in the last one week with improved transactions. The finished product price also rebounded strongly after a two week slide. The crude steel output in china for the month of June had crossed 20 million MT, which is a record output. The affordable housing scheme in China, slated to gain its pace in Q3, will further push the steel prices to higher levels. The interest rate hike on Wednesday did not weigh much on the price movement.
The draft mining bill, likely to be presented in coming monsoon session of parliament, has agreed to earmark 100% of the royalty paid by the mineral mining companies to compensate people displaced by such projects. The royalty of 10% on iron ore goes to the state government currently. The bill also proposes a 26% profit sharing for the coal miners and doubling of iron ore royalty. The bill will not have much of an effect on the iron ore prices in the short term but can deter fresh investments from domestic and overseas investors in the mining sector.
The dry bulk freight rates are trapped in a very tight range for quite some times with marginally improved activities in the last few days. The Indian route traffic is largely affected by the monsoon. The smaller vessels, which are more active in the Indian route is hit badly due to the monsoon and reduced activity of iron ore. Small and medium iron ore exporter from India rely more on road transport rather than rail transport to move the material from the mines. The typical quantity transported by the medium size exporters range from 20000 MT to 30000 MT per month in normal weather conditions. During the monsoon season, it takes around one and half months to move the same quantity by road. A shortage of material availability from Orissa has put further pressure on the material movement. The handy size vessel orders have gone down considerably since June owing to the scarcity of iron ore cargos from Indian ports. The current Panamax rates hovers around $15 to $16 for East India-north china route.
The 63% grade Indian iron ore fines is currently quoted around $180 to $181/MT, which is a $3 to $4 hike from the previous week. If the prices are to stay above the $180 mark, higher number of transactions can be expected in the coming week. The market condition favors a price range of $180 to $185/MT CFR for 63% grade Indian iron ore for the second half of July.
