Monthly Archives: August 2011

China: Spot iron ore prices remains firm on strong anticipated steel demand 

Firmer steel prices in China have
lifted iron ore prices to their highest since mid-May. Price offers for
imported iron ore in China were steady on Wednesday, with Australian 62 percent
Newman fines quoted at $182-$184/MT, including freight, and Indian 63.5/63
fines at $189-190/MT.

Shanghai rebar steel futures also
gained for a second day on Wednesday ahead of an expected rise in consumption
over the next two months.The most-traded January rebar contract on the Shanghai
Futures Exchange rose 0.4% to 4,827 yuan/MT

Prices of rebar, used in
construction are expected to sustain gains in September and October, usually
the peak consumption season for steel in China.

“The expectation that
September and October will be a good season is quite high, Steel mills and
traders believe this could be the last chance for more price increases this
year because after October, northern China will be frozen out and there will be
no construction activities”, said Henry Liu, regional head of commodity
research at Mirae Asset Securities in Hong Kong.

However, the flat steel producers
are likely to hit as consumption has been weakened by a slow manufacturing
sector.

 

 Anticipated hike in export duty of Iron ore might rise prices in Spot market

The Union Steel Minister's announcement in the Lok Sabha on Tuesday that the Government may further hike the duty on iron ore exports to preserve supplies for domestic steel producers, has fuelled speculation about a probable rise in the benchmark price of the mineral.

The apprehension that the price might exceed $190 a tonne again may not be entirely unfounded.

The benchmark iron ore price, now set by the quarterly contracts linked to spot market, peaked in the first quarter of 2011 to more than $190 a tonne — a record high — and moved in a narrow band of $170-$180 a tonne for several weeks.

Last week, the benchmark with 62 per cent iron content for delivery into China hit a three-month high of more than $180 a tonne largely due to strong demand from China, the world's largest importer of iron ore, and tight supplies from India, the world's third largest exporter, following clampdown on illegal mining and higher export duties.

China accounts for about 60 per cent of the world's sea-borne trade for the commodity. Australia and Brazil are the largest exporters to China.

However, the chief executive of BHP Billiton, the world's largest miner and third largest producer of iron ore after Vale of Brazil and London-listed Rio Tinto, was recently quoted as saying that rising production costs and financing problems were causing delays at new projects.

CHINESE PRODUCTION

Chinese domestic iron ore production, too, is believed to have been hit by lower grades and high cost-push inflation.

The problems have already pushed up the floor prices of iron ore to $140 a tonne, according to analysts.

According to one estimate, India's exports which fell for the first time last year in a decade, could halve over next five years to meet the burgeoning domestic demand for the ore.

Between April and July this fiscal, the exports were 23.78 million tonnes (mt) compared to 32.51 mt in the corresponding period of last fiscal, thus recording nearly 27 per cent decline. In 2010-11, the country's iron ore exports were 97.65 mt, posting a 17 per cent decline from 117.37 mt in 2009-10.

The export of lumpy ore now attracts 20 per cent duty against 15 per cent earlier. Another round of increase in duty will therefore mean further squeeze in exports with probable ripples in the world price of the mineral

 

Baltic index rallies on capesize cargo deal surge

The Baltic Exchange's main sea freight index,which tracks rates toship dry commodities, jumped to its highest in nearly eight monthson Wednesday, helped by a surge in iron ore and coal cargo activiyon the larger capesize vessels.	
    
Brokers said a growing ship glut was set to cap dry bulk freight rate gains in the coming months.The overall index rose 5.34 percent or 82 points to 1,619 points, reversing three previous sessions of falls. Prior to the drop, the index had risen for 11 straight sessions, hitting a near seven-month high.	
    	
    "What's driving it is the continuous shortage of ships in the Atlantic,mainly capes," said Georgi Slavov, head of dry freight and basic resources research with broker ICAP Shipping.	
    
"Secondly there are very strong exports of iron ore and coal out of Brazil,and the Australian coal exports are finally catching up,"he said, referring to weather-related disruption earlier this yearthat hampered Australian exports.	
    
Slavov said Japanese coal imports also were picking up after an earthquake earlier this year hit volumes.

Increased spot cargo volumes across the board bringing the market back to levels not seen since early winter. All routes expected torise further as strong support is also seen from derivatives.

 

“MS Ingot prices have bottomed out”- Traders

MS Ingot market continues to show a sluggish trend & prices have almost bottomed out says traders based at Mandi Govindgarh.

Ingot in Mandi Gobindgarh opened at Rs. 31,200/MT during the day, despite steel futures on NCDEX shed Rs 180/MT.

“Prices have bottomed out, there are buyers at Rs 31200/mt though sellers are quoting Rs 31300/mt. Prices might not go below this level.” said an Ingot trader based at MAndi Govindgarh.

Whereas, Raipur markets remain unchanged and witnessed trade at  Rs.29,000/ MT.

 

Spot iron ore remains firm on tight supply

The spot market for iron ore is sustaining its strength
backed by restocking activities from Chinese mills and tight supplies from
India.

“Demand is strong, especially for low-grade ore, which
brings down mills' costs dramatically. There's absolutely no weakening in the
market,” said a Shanghai-based iron ore trader.

The trader said he recently sold an iron ore cargo with 55
percent iron content at $134 to $135/MT, cost and freight, to a steel mill
located in China's Hebei province, up sharply from a previous deal of $126 to
$127/MT.  

Whereas, offers for higher grade Fe 63.5/63 remained firm at
$189-190/MT and a cargo of Fe 60 % was sold at $170/MT CNF

“There's a lack of cargo availability from India.
There's hardly any low-grade cargo available and even for medium and
high-grade, supply is limited. Monsoon rains have virtually halted iron ore
shipments from India's west coast and eastern areas are suffering from
congested ports and other logistics problems ” said the another iron ore
trader.

 

Consumption of finished steel reaches as low as 1.5% in Q1

A sharp slowdown in construction activities have pulled down the economic growth of India to below 8 per cent in the first quarter of the current fiscal.
And lesser construction activities have brought down the consumption
growth of finished steel to as low as 1.5%.

The country's real gross domestic product (GDP) grew by 7.7
per cent during April-June against a year-on-year increase of 8.8 per cent in
the same quarter of 2010-11.

The real laggard was construction that returned a measly 1.2
per cent growth during the latest ended quarter, compared with 7.7 per cent in
April-June 2010.

“The key indicators of construction sector, namely,
production of cement declined by 0.9 per cent and consumption of finished steel
registered growth rate of 1.5 per cent, during Q1 of 2011-12,” the Central
Statistics Office said in its statement issued here on Tuesday.

 

Jharkhand assembly witnesses a uproar over iron ore fines

Jharkhand assembly yesterday witnessed a furor when Chief
Minister Arjun Munda turned down a demand of the opposition to withdraw a
decision which allows export of iron ore fines of
the size upto 10 mm.

Jharkhand Vikas Morcha (Prajatantric) legislature party
leader Pradip Kumar Yadav raised the issue in the question hour and demanded withdrawal
of the decision.

In reply Munda said the decision was taken in accordance
with the Indian Bureau of Mines (IBM) rules to reduce environment pollution
following huge deposits of iron ore 'fines' in the state and also keeping in
mind the per capita steel requirement of the country in the next fifty years.

The opposition suggested that the state government should
set up factories in the state, allowing them to use fines so that employment and
resource opportunities would increase in Jharkhand. 

 

“Iron ore export duties may be pushed by 5-10%”- Steel Ministry

A further increase
in iron ore export duties of 5-10 per cent may be pushed for by the Steel
Ministry. Export duty of 20 per cent currently apples to both fines and
lumps.

In a reply to a Lok
Sabha question, Minister Beni Prasad Verma said duty could be
increased further. An official confirmed that while the Ministry was yet to
make a formal request to the Commerce Ministry, it was considering asking for
export duty to be raised to 25-30 per cent. 

Iron ore exporters believe the Government was taxing one industry, and one
mineral, too much. “Especially for Goa's low grade iron ore, most of which
is of 56-58 FE grade and has no domestic takers. Iron ore is exported only
after meeting domestic requirement,” said Mr Sridhar, Executive Director,
Goa Mineral Ore Exporter's Association. 

Mr Verma told Lok Sabha on Monday that conservation of iron ore resources of
the country and for domestic consumption should be achieved through fiscal
measures and not capping or banning exports. Estimated exports for 2010 -2011
accounted for nearly half of the country's production of 208.11 MT. 

The current ban on iron ore mining in the three districts of Karnataka is
likely to further reduce export volumes. Already, before the Supreme Court
suspended private mining, exports to China had fallen from 125 mt in 2009-10 to
95mt in 2010-11. the ban has also impacted steelmakers, though the court has
asked NMDC to provide a million tonnes per annum to affected steelmakers in
Karnataka.

 

Slowdown in construction sector drags India's growth

The Indian economy grew at a meager 7.7% in the first
(April-June) quarter of fiscal year 2012 as against of 8.8 per cent during
April-June 2010.

The lower growth rate is mainly due to a slowdown in
construction sector which saw an increase of just 1.2 per cent during
April-June 2011, compared with 7.7 per cent in the same quarter of last year.

Poor performance of the manufacturing sector, which grew
7.2% during the quarter versus 12.7% on year-on-year basis also contributed to
the slower growth rate. The Mining
and quarrying (1.8 per cent versus 7.4 per cent) sector also registered a slower
pace rate. But the deceleration in these sectors is not as worrying as it is in
construction sector.

The government has projected overall economic growth in the
current fiscal at around 8.5%, while the Reserve Bank has projected the growth
to moderate to 8% from 8.5% in FY11.

 

Coal India to hike output by 5 %

Coal India is trying to achieve a five per cent growth in
output for the current fiscal. This is despite hurdles such as the delay in
regulatory clearances and issues relating to land acquisition.

“CIL production has been hit due delays in environment and
forest clearances, land acquisition and problems like extremism and law and
order. Efforts are being made to raise production by 5 per cent this fiscal,”
the Coal Minister, Mr Sriprakash Jaiswal, told the Rajya Sabha on Monday.

Coal India's output over the past couple of years has been
largely stagnant. Last fiscal, Coal India's production stood at 431.32 million
tonnes.

Mr Patil said the coal stock with power stations has
increased from 11.51 mt at the end of July 2010 to 13.164 mt at the end of July
2011. Coal India has offered to supply 447 mt of coal to power utilities in
2011-12 subject to the availability of wagons by Railways at an average of
190.4 rakes per day during the year.

Further, in a bid to plug the growing demand-supply gap,
Coal India is looking at overseas acquisition. Besides, it is also planning to
start production from the two coal blocks it had acquired in Mozambique
recently.

Source: The Busimess Line