Date | March 10, 2016:
Increasing demand for domestically mined iron ore, coupled with rising price trend in the overseas market, is helping build a strong case for an upward price revision in the commodity in the local market.
On Monday, global iron ore rates shot up 19 per cent after the Chinese government said it would keep growth rates high over the next five years. This indicated positive signals for commodities market that are heavily dependent on consumption by the dragon nation. According to China’s foreign trade data released on Tuesday, the volume of iron ore imports improved, rising 8.3 per cent in February compared to a year ago. This follows a weak growth in January.
Alongside, the booking price for e-auctioned iron ore in Karnataka has moved up significantly compared to the floor price, indicating higher demand for the commodity from domestic primary steel producers.
At the latest iron ore e-auctioning bid round held on March 4 in Karnataka, the booking price of the commodity was consistently higher compared to the floor price for several lots of iron ore that were auctioned.
“There is enough room for iron ore prices to go up. Maybe prices can be revised by Rs 700-1,000 per tonne in the domestic market,” said an official with MSPL, one of the leading iron ore mining companies in Karnataka.
The demand for iron ore has picked up in the domestic market after the imposition of minimum import price (MIP) in early February on a range of steel products, with domestic primary steel producers raising capacity utilisation levels to meet the demand shortfall due to absence of imports.
“Steel imports have stopped completely after MIP and this has resulted in the shortage of steel in the domestic market. Due to this, steel producers have room to sell their products here (in the domestic market),” said Nikunj Turakhia, director at Bombay Iron Merchants’ Association.
Iron ore is the key raw material used in the making of steel. While India’s total domestic steel capacity stands at 120 million tonnes (mt), the country’s iron ore production is about 160 mt.
Following the imposition of MIP by the government, Sajjan Jindal-led JSW Steel had re-commissioned two of its blast furnaces, which were shut since August and November 2015 at Vijaynagar and Salem, respectively. This is indicative of steel companies gradually pushing up their capacity utilisations to meet the domestic steel demand.
“There is certainly room for domestic iron ore prices to go up as capacity utilisations of steel plants have gone up. But, to gauge the quantum of rise, we need to wait for a while to see if the uptrend in global iron ore prices is sustaining. We will have a clearer picture by early next week,” said an official with Odisha-based Rungta Mines. Rungta Mines, unlike Odisha Mining Corporation, sells its mined ore in the open market and, hence, itself fixes the price for the ore.
Currently, the company’s ore price is lower than that offered by state-owned NMDC, which is looked at as a benchmark by domestic iron ore miners.
Meanwhile, low-grade miners of Goa remained indifferent towards the stance that the domestic iron ore sector should take regarding price fixing of the mineral as most of its ore finds way out of the country in the form of exports mainly to China.
“Domestic iron ore industry needs to give this global price spike some time to see if the uptrend is sustainable,” said Glenn Kalvampara, secretary, Goa Mineral Ore Export Association.
In the global market, iron ore futures in China jumped another six per cent on Tuesday. Expectations of a short-term boost in China’s steel production, as producers looked to brisk seasonal demand, underpinned price gains in iron ore, said reports. The raw material is now up 46 percent year-to-date, making it the top performing commodity.
Source: Business Standard
(Source: http://www.hellenicshippingnews.com/)