Iron ore upswing may not last as China mulls raise in output

Sunday, 13 February 2011
Iron ore prices , which have been steadily climbing to touch $200 per tonne, may cool off in the long run as China is all set to increase iron ore production. The Dragon has just identified 4-5 billion tonne iron ore mines near Mongolia and this may impact their buying pattern in the global market. Basant Poddar, MD of Mineral Enterprises, said: “The current upswing may not continue for long as China is trying to bring new mines into production. Since China is the largest producer of steel and is a large buyer of iron ore from the global market, the new development is expected to influence their purchases.

Since they buy a substantial quantity of iron ore from India, a drop in their offtake could have a bearish effect on Indian exports.” A similar view was expressed by RK Sharma, secretary general of Federation of Indian Mineral Industries, who added that China will continue to play a big role in influencing global raw material prices. “Globally, there is a supply crunch of iron ore. This is expected to drive prices up further in the coming days. The Chinese have, so far, not been active in the global market due to the New Year-related activities,” Sharma said. In the next few months, the outlook on prices is expected to remain bullish as the global steel industry is led by the revival in demand from the Chinese steel makers. H Noor Ahmed, partner of Trident Minerals, said that the current upward price movement is a “momentary phenomenon” and is largely expected to be led by China. “However, we are now disturbed with the closure of iron ore mines in Karnataka which is affecting domestic supplies,” he added.

The trading community expects prices to remain firm in the next few months. “We are noticing a general uptrend in steel input prices due to the recovery in Europe and the US. China, the world’s largest steel producer, too is expected to continue its growth. This is likly to firm up prices in next few months. For Indian steel companies that rely on the market to get ore, this imply a hike in production costs,” said an official of the Indian arm of a leading global trading firm.
(source:TheEconomicIndiaTimes)