Commodity Minerals, Exports News: Iron ore prices set to rise as India's exports slow in Nov2010

Courtsey news by: G. Chandrashekhar Mumbai, Dec. 20, The Hindu Business Line
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.The embargo in July followed allegations of illegal mining. Slowdown in shipments from India has surely had an impact on world iron ore spot market prices which have firmed.Karnataka ports shipped out about 15.2 million tonnes of iron ore in 2008, which declined to 12.2 mt the following year. Tamil Nadu ports also handle some material from Karnataka and the export shipments totalled some 8 mt in 2009.From the time the ban was imposed, iron ore shipments from the two States have all but dried up. Extended South-West monsoon has also to some extent affected shipment volumes.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 volumePointing 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. Until exporters are able to meet the rigours of the documentation system or find a way to work around it, export volumes are unlikely to improve dramatically in the next few months. 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. In other words, iron ore is likely to be increasingly utilised within the country, while availability for export is likely to shrink progressively.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 as a result of which smaller Chinese mills which are expected to ramp up production in 2011 will have to compete aggressively for lesser supply, Macquarie remarked.Incidentally, any gain in Indian seaborne volumes may be offset by a fall in Brazilian exports due to rainy season during the first quarter. For past eight years, the first quarter shipments had fallen on quarter-on-quarter basis and this year could be no exception. Already, January cargoes are said to be pushed back as early rains have hampered ore availability.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.
For more details visit : http://www.thehindubusinessline.com/2010/12/21/stories/2010122152701600.htm
Tag : India iron ore exports, Karnataka Government, iron ore spot market prices