Monday Market Monitor - Iron Ore (WEEK 14) - Crosses USD 170 CFR- 13 Apr 10

Spot prices of Indian iron ore fines for higher and medium grades continued to march north last week with 3% to 8% gains on FOB India basis.
Some of the key factors affecting the iron ore market in India have been as follows
1. Severe crack down by government on illegal mining leading to curtailed availability and hiked prices on East Coast
2. Hike in railway freight by INR 300 per tonne
3. Imposition of 5% and 10% export duty iron ore fines and lumps

4. Iron ore majors Vale, BHP Billiton and Rio Tinto targeting quarterly pricing rather than annual with a 100% hike in prices leading to an imbroglio with Chinese buyers once again

5. Clamor by steel ministry for 20% export duty on iron ore fines to discourage export to augment domestic availability mills vie for capacity expansion.

6. Restrictive approach of Chinese buyers by banning import by traders with turnover of less than 1 million tonne is 2009

7. Banning import of lower grade iron ore below Fe 60% through traders

8. Banning import of iron ore for 2 months to arm twist Big 3 from dictating price levels for quarterly contracts.

9. Anticipated devaluation of Chinese currency under pressure from Western world.
All the above factors cumulatively is bound to exert downward pressure in the market sentiments as India being a major player in lower grade iron ore will be left with surplus volume to be ultimately diverted to domestic market thereby bring down the prices. However it should be music to Indian manufacturers in the long run as cost deescalates bloating their margin.

Apr 13, 2010 09:20
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