Tuesday, December 21,
The decline in India’s iron ore exports in recent months is generally attributed to the Karnataka Government’s imposition of ban on movement outside the State and export from out of the ten ports.
Slowdown in shipments from India has surely had an impact on world iron ore spot market prices which have firmed.
However, despite ban imposed by Karnataka and slowdown due to seasonal factors, overall seaborne supply from India is down only 9 per cent in the first ten months of the year, although exports in the third quarter fell 37 per cent year-on-year and are 31 per cent down year-on-year in October-November, according to the latest Macquarie Research report.
Impact on volume
Pointing out other factors that have impacted export volume, the report said clearances are getting considerably slow because of rigorous and complex documentation system stipulated by many States to ensure traceability of ore and to ensure taxes have been paid.
However, the good news is that some ore which was previously exported is now being pelletised and consumed within the country as steel demand continues to grow rapidly.
According to Macquarie Research, relatively high steel prices (compared with international levels) are allowing the Indian steel mills to pay more for material thus, making export arbitrage negative.
Domestic demand for steel is widely expected to expand in the coming years given the robust economic growth and booming activity in the construction sector covering infrastructure and housing in the main.
What to expect in 2011? Volume-wise Indian exports may rise in the coming months with shipments from Goa leading the way. However, spot market availability will still continue to remain tight.
Incidentally, any gain in Indian seaborne volumes may be offset by a fall in Brazilian exports due to rainy season during the first quarter.
All these developments point to tightening of the ore market and further firming spot prices. There is a strong chance of a price spike towards $200 a tonne early next year as ex-China purchases come back into the market to secure material ahead of seasonally strong Q2 production in the northern hemisphere, Macquarie pointed out.
Source: The Business Line
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