The Australian reported that Australian miners Rio Tinto and BHP Billiton look set to profit from India's attempt to keep its iron ore at home after Indian government announced it would quadruple export duties on the raw material.
Analysts said that India's move is expected to keep iron ore prices near record levels, with the latest quarterly pricing contracts struck at about USD 180 per tonne.
China absorbs much of the iron ore sent from India, the world's third largest exporter of the crucial steel ingredient behind Australia and Brazil, and any increase in duties will likely be passed on by its producers to the Chinese consumer, forcing up the global price.
One market insider said that "The immediate impact is potentially positive in the sense that India is the marginal cost producer in the market and when supply is as tight as it is at the moment, then these export duties get passed on, which gets added on to the global spot price. Assuming China can continue to pay, the price will go up and everyone who sells into the seaborne market will benefit."
Mr Zhu Xi'an, Beijing based analyst at Mysteel.com, said the new restrictions would help support the high price of iron ore as Indian export volumes dropped, following state restrictions introduced last year in several mineral rich Indian provinces. He added that "The proportion of Indian ore coming into China has dropped from 25% in 2005 to 15.6% in 2010. The restrictions and increase of tax will benefit other ore suppliers, including Australian mines."
But the move could also be a mixed blessing for smaller Australian miners operating within the Indian market, such as Perth based NSL, which bought up two small iron ore interests in India in 2009 to feed China's insatiable demand. (Theaustralian)
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