iron-ore-report_May 13.pdf

IRON ORE INSIGHTS

Seaborne iron ore prices likely soft in June 2013
‣ International iron ore prices are likely to move in a narrow range in June 2013, according to
India Steel Market Watch (ISMW) poll of industry players.
‣ Prices of iron ore of 62/63% Fe content are likely to be in the region of $125-130/ton cfr China in
June 2013.
‣ Prices of 58% Fe content iron ore may go down up to $111/ton cfr China in June 2013.
Factors influencing seaborne price movement in June 2013
‣ Stockpiles at ports in China stood at 70 million tons, a level considered as comfortable by
Chinese steel mills.
‣ There is growing concern that slowing economic growth in China, the world’s biggest buyer, will
reduce demand as global supplies increase
‣ China's April industrial output trailed estimates and fixed-asset investment slowed after
economic growth unexpectedly contracted in the first quarter, data showed. Bank of America
Corp. reduced its estimate on China's 2013 gross domestic product growth to 7.6% from 8%.
Following are likely iron ore prices in international markets:
Grade %
Fe Origin Product load port Destination
June 2013 prices
cfr ($/ton)
Current prices
cfr ($/ton)
63.5 India Fines Vizag Qingdao 128 130
62 India Fines Vizag Qingdao 125 127
61 India Fines Vizag Qingdao 122 124
60 India Fines Vizag Qingdao 119 121
59 India Fines Vizag Qingdao 117 118
58 India Fines Vizag Qingdao 111 114
Source: Traders, industry sources
Likely scenario’s that may impact price movement
Although market feedback points towards soft market scenario in June 2013, a cause-effect analysis
would show the factors that may take prices down or up:
Factors influencing soft international prices
Cause
Effect
Stockpiles at ports rise over 70 million tons Chinese buyers will be cautious on purchases resulting softer prices
Slowing economic growth in China
This may reduce buying by steel mills resulting in soft prices
Supplies from miners rise
This may increase stockpile in ports resulting in bitter negotiation
Factors influencing high international prices
Cause
Effect
Port stock falls from 70 million tons in China Restocking will raise prices
Economic growth rebounds
May lead to higher rebar demand and ore demand
Supplies from miners decline
Increase in demand-supply gap to raise prices

Domestic iron ore prices likely under pressure in June 2013
‣ Domestic iron ore fines prices likely to be in pressure in June 2013.
‣ Prices of iron ore fines of 63% Fe grade would likely be around Rs 2000/ton (FOR) in June 2013.
‣ Small miners even offering 63% Fe grade as low as Rs 1600-1700/ton (FOR).
‣ CLO (calibrated lumpy ore) prices likely to see more correction in June 2013.
‣ Prices of lumps of 63% Fe grade would be in the region of Rs 6,500-7,000/ton (FOR) in June
2013.
Factors influencing domestic price movement in June 2013
‣ Sponge and pig iron prices at rock bottom level resulting in pressure on iron ore prices.
‣ Recent recovery in sponge prices because of imposition of 2.5% import duty on scrap imports
and not because of real demand.
‣ Odisha has raised the cap on mining permission to 57 million ton from 52 million ton earlier.
‣ Added to this there is a book closing stock of 50 million tons in Odisha.
‣ This shows iron ore availability has increased in the eastern region and there is lack of demand
momentum in eastern and southern regions of India because of subdued demand from end
users.
‣ Meanwhile, around 44 mines in Karnataka falling under the category A is likely to start
operations in the next 2-3 months although category B mines likely to take more time to start
because of R&R issues and approvals. This will improve supplies in Karnataka.
Pellet prices
Size
Grade
Likely June 2013
prices (FOR)
Current price (FOR)
Fines 63 1600-1700 1700
Blue Dust 63 2000-2200 2300
10-30mm 65 6700 7000
10-30mm 63 6400 6500
Source: Traders
‣ In line with iron ore prices, pellet prices are likely to remain under pressure in June 2013
‣ Prices of Barbil origin material are likely to be around Rs 7400-7500/ton basic in June 2013.
Factors influencing domestic pellet price movement in Q1 FY14
‣ There is no positive demand stimulus from sponge iron makers because of low end use demand.
‣ Looking at the softening prices of sponge iron in domestic market and quiet weak demand for
pellet, manufacturers based in Odisha have lowered prices in the range of Rs 250-300/ton to Rs
7,400-7,550/ton (ex-works).

‣ Due to high power prices, Indian sponge iron offers have touched levels seen two years back,
which ultimately resulted in low capacities. Hence, pellet demand has been hampered and
availability of expensive and inferior quality lumps has further squeezed margins of pellet
producers.
‣ Negative sentiments are built up at the moment due to continuous drop in steel prices. This has
limited the buying interest from the few operational sponge iron units, running at minimum
production capacities.
‣ It is expected that around 13.1 mt of pellet capacity would be coming up in eastern India by
2013-14 leading to excess supply in the area and pressurising prices.
Pellet prices (basic Rs/ton)
Place Size Grade June 2013 price Current price
Odisha 5-20mm 63% 7400-7500 7400
Jamshedpur 5-18mm 63 7800 7900
Bellary 5-18mm 62 7300 7400
Other factors influencing iron ore market in June 2013
‣ Nation's largest state owned iron ore miner - NMDC with an annual production capacity of 30
million ton and Rungta Mines, having an annual production capacity of 12 million tons, cut iron
ore lumps prices earlier in April and May respectively, while the fines prices were kept
unchanged due to the depressed demand in lumps.
‣ Around 44 category A grade mines may start operations in 2-3 months, resulting in higher
supplies.
‣ However, opening up of category B mines in Karnataka will take more time because of clearance
issues and compliance of R&R issues.
‣ India’s iron ore production in 2012-13 is estimated at 140 million tons versus 169 million 2011-
12 despite the mining ban in Karnataka, according to Ministry of Mines. Production will increase
in 2013-14 with the re-opening of the mines following the Supreme Court order.
Likely scenarios that may impact domestic prices movements
Although market feedback points towards pressure in domestic iron ore prices in June 2013, a causeeffect
analysis would show the factors that may take prices down or up:
Factors influencing soft domestic prices
Cause
Effect
Sponge, pig prices at rock bottom level Low buying will put pressure on prices
Higher mining permissions in Odisha
May result in increased supply on low demand conditions
Re-opening of mines in Karnataka
Will ease supply crunch & reduce prices
Low capacity utilisation by mills
Will lower demand for the raw material
Higher imports of good quality ore
Will result in lower demand for low quality domestic ore
Gap between lump & pellet price falling May put further pressure on lump prices

Factors influencing high domestic prices
Cause
Effect
Rebound in sponge, pig prices on scrap duty Will increase demand & prices of domestic ore
Lowering of mining permissions by Odisha Will lower stock in hand & put pressure on prices
Delay in re-opening of category A mines
Will prolong supply crunch & raise prices
Rebound in end product demand
Will raise demand for iron ore
Lowering of iron ore imports
Will raise demand for domestic material
Will result in supply crunch & consequent price
Further lowering of ore output in FY14
increase
Iron ore movement position
‣ The iron ore vessel movement position shows that around 1.07 million tons of iron ore are in
transit in different ports.
‣ The data includes exports and imports to international ports and domestic movement of iron
ore traffic
‣ Following is the indicative iron ore vessel movement position in various ports:
Port
Vessel's Name
Berthed
/
ETB
(Export)
Cargo
Quanti
ty
(in
MT)
Impor
t /
Expor
t
Load /
Discharging
Port
Shipper
Receiver
KOLKATA
BRILLIANT
JOURNEY
KOLKATA PAC STAR 4-May
PARADIP
FUTURE LILY
4-May IRON ORE 20000
15-May
VIZAG MARIETTA 3-May
REDI
REDI
REDI
REDI
JAIGARH
GRAND
BREAKER
ASIAN
CHAMPION
VINALINE
SUNRISE
INDIGO SPHARA
MARLENE
D'AMATO
10-May
13-May
19-May
22-May
KOLKATA WU CHANG HAI RVT
KOLKATA ATRO 1 RVT
KOLKATA
PORT
MELBOURN
IRON ORE
FINES
IRON ORE
FINES
IRON ORE
FINES
IRON ORE
IRON ORE
IRON ORE
IRON ORE
20000
55000
32422
54820
55000
55000
55000
29-Apr IRON ORE 84600
RVT
KOLKATA AN KANG JIANG RVT
VIZAG
VIZAG
AS VICTORIA
MALLIKA NAREE
10/May/
13
9/May/1
3
IRON ORE
FINES
IRON ORE
FINES
IRON ORE
FINES
IRON ORE
FINES
IRON ORE
FINES
IRON ORE
FINES
12500
18000
17500
15000
30000
28950
EXPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
IMPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
CHINA RUNGTA GROUP RVT
CHINA
PARADIP
LIANYUNGANG -
CHINA
CHINA
CHINA
CHINA
CHINA
INDONESIA
GHANASHYAM
MISHRA
SM NIRYAT
RUNGTA MINES
LTD.
ILPL FOMENTO
GROUP
SAMURDDHA
SAMURDDHA
SAMURDDHA
RVT
China Lords Bluetech RVT
CHINA
CHINA
CHINA
KALING / AB
METALIKES
SUDHAMA /
PRESIDENT
FAIR DEAL
SUPPLIERS
NOT
AVAILABLE
SINO STEEL
INTL
RVT
RVT
RVT
JSW
VIZAG / LIBERTY & REVERT
CHINA
PROGRESSIVE
MINES
REVERT
VIZAG AS VALDIVIA 11/May/ IRON ORE 35800 EXPO VIZAG / AURO GLOBAL & REVERT

VIZAG
VIZAG
VIZAG
VIZAG
VIZAG
MAGDAL
LA
MAGDAL
LA
MAGDAL
LA
BRILLIANT
JOURNEY
IRIS HALO
GMT PHOENIX
CHANDI
PRASAD
LARK
BLUE SEND
GEM OF
PARADIP
RAM PRASAD
13 FINES RT
13/May/
13
14/May/
13
19/May/
13
9/May/1
3
8/May/1
3
4/May/1
3
3/May/1
3
Source: Samsara data & port
IRON ORE
FINES
IRON ORE
FINES
IRON ORE
FINES
IRON ORE
PELLETS
IRON ORE
FINES
40000
57000
16000
13500
0
39400
IRON ORE 46000
IRON ORE 41000
IRON ORE
11000
0
EXPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
EXPO
RT
IMPO
RT
IMPO
RT
IMPO
RT
VIZAG / RUNGTA REVERT
VIZAG / RUNGTA REVERT
VIZAG / GLOBAL REVERT
HAZIRA ESSAR ESSAR
MUMBAI JSW ISPAT JSW ISPAT
PARADIP
ESSAR
PARADIP
EBTL
VIZAG
ESSAR
Divergent market voices
‣ The increase in global supply may take longer than expected, while demand in China may be
sustained into 2014, Morgan Stanley said in a report. The bank said in April that the global
seaborne market will shift into surplus from 2015, revising a January forecast of supplies
outpacing demand in 2014. “Market concerns over the sustainability of strong iron ore prices
are focused on the prospect of an excess of supply coming to market in 2013 and 2014,”
analysts Joel Crane and Peter Richardson wrote in the report, referring to expansions such as
the Pilbara operations. “While an increase in mine capacity is well understood in the market, the
timetable of ramp-up into that capacity is not.”
‣ Iron ore prices will go into structural decline in the long term as the market moves into
oversupply in 2014-2015, Goldman Sachs Group Inc. said in a report, forecasting an average of
$115 a ton in 2014.
‣ “Chinese macro data has been worse than expected,” Daniel Hynes, Sydney-based head of
commodity strategy at CIMB Group Holdings Bhd. (CIMB), told Bloomberg. Rio Tinto Group’s
planned expansion of its iron ore operation in Australia “brings focus back on the supply side
which, from an Australian point of view, is growing strongly,” he said.
‣ Prices will decline as supplies expand faster than demand over the long term, Alan Chirgwin,
general manager of iron ore marketing at BHP Billion Ltd. (BHP), told Bloomberg. Low-cost
supplies mainly from Australia and Brazil will replace more expensive output and eventually
exceed Chinese demand, he said.

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