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