High grade Iron Ore prices rise 20% in one month2007-08-30...

High grade Iron Ore prices rise 20% in one month
2007-08-30 18:49:51 Source : Moneycontrol.com

The prices of high grade Iron Ore have increased by nearly 20% in last one month and 10% in 10 days due to reduced exports from India and port congestion in Australia.

Chinese steel production rate has also fallen to 10-15% due to cost inflation.

Huge appetite for Steel from China and increase in international freight costs have helped the prices of iron ore to soar by 86% since January this year. This would lead to a surge in global steel prices and impact end users.

One of the reason for rise in iron ore price was the freight rates, which from Brazil to China have gone up to USD 65-71 in August 2007 from USD 35-40 per tonne in January 2007.

Chinese FOB (freight on board) spot prices of ore touched USD 104 per tonne on Tuesday from USD 56 a tonne in January, as per release from China Chamber of Commerce of Metals Minerals and Chemical Importers and Exporters.

This rise in freight rates from Brazil to China has helped Indian iron ore exporters like Sesa Goa as freight rate from India to China stands at USD 30-35 per tonne. China demand for iron ore will be more from India as India exports with low freight rate compared to other countries.

Iron ore demand would continue to increase in China, said Morgan Stanley. They also said, "We believe supplies are finding it difficult to catch up with growing demand from China. An impending tapering off of ore exports from India is compounding the supply shortage. India has been a large swing supplier of iron ore to China in the past three years."

Report said, "We believe the iron ore market is tightening ahead of the negotiation period for next year's iron ore pricing. Accordingly we are confident of our forecast of 30% YoY increase in iron ore contract prices for F2009. Consensus expectations are for just a 15-20% YoY increase."

"Steel production in China has continued to rise in the mid-teens in percentage terms YoY, despite a lack of good quality domestic iron ore reserves. Therefore, China's dependence on imported iron ore looks set to remain high. Indeed, we believe China will need even more iron ore in the next four or five years as the country continues to bolster its infrastructure - such as its power generation and transmission capacity, and its ports, roads, and rail network. In the past two years, China's steelmakers have rushed to secure domestic iron ore supplies to cut freight costs and to improve their bargaining power with overseas ore suppliers. However, the quality of iron ore produced in China has declined", said reports.