15/05/14 – Spot iron ore prices slip below $100 per tonne

Iron ore prices have slipped below the $100 per tonne level in the spot market forcing exporters to rethink on their export strategies. Exporters from Goa are unlikely to rush in to bid for the material at e-auctions, as it would not be profitable for them to export at current prices.

The spot iron ore prices have seen a year-on-year decline of 19% to $95 per tonne on FoB basis for 63/63.5% Fe fines. The decline in prices is mainly on account of reduced demand as well as the piling up inventories at the Chinese ports. A year ago, the prices were ruling at $117 per tonne. The previous low was seen in September 2012, when the prices touched $96 per tonne FoB.

“The iron ore inventories at the Chinese ports have gone up to 113 million tonnes for the week ending on May 9, 2014. The normal disruptions in supply, seen normally during the first three months of the year, were not there this year. The Chinese pig iron production was also very low in the first three months. As a result, the prices of iron ore have declined,” said Prakash Duvvuri, head of research, OreTeam Research, a Delhi-based iron ore research firm.

The drop in steel demand in China has added to the piling up of iron ore inventories at Chinese ports, he said. The demand for steel has been slowing in China since July-August 2013.

Going by the current trends, the spot prices are likely to decline by another $10 per tonne by end of June due to increase in supply of the raw material. By end of 2014, it is expected that China would have at least 80-85 million tonnes of excess iron ore.

As a result of the free fall in the prices, the exports of iron ore from India has become unviable, especially for Goan exporters. The margins for exporters would be in the order of Rs 150-200 per tonne. This has forced many exporters to rethink on participating at the e-auctions in Goa. This was evident in the May 12 auctions as there were not many exporters to bid for the ore, Duvvuri said.

Moreover, the exporters were not sure of how much time it would take for them to get all the necessary clearances to move the auctioned material. As the monsoon is fast approaching, it would be difficult for them to export iron ore.

During the first two rounds of e-auctions held in Goa, a total of 1.6 million tonnes of ore was auctioned. Of this, hardly 120,000 tonnes were exported

Source – Business-Standard.com