iron price set to increase

Today, "Benchmark iron ore touched three-month highs of above $120 a tonne on sustained buying interest from Chinese steelmakers refilling raw material inventories."

Two major events will drive IO prices higher.
A)China's leadership transition
B)Slowing supply from key exporters ie. India.

India Iron-Ore Shipments to Plunge as Orissa State Suspends Exports
Published November 06, 2012
Dow Jones Newswires
India's iron-ore shipments are expected to plunge to about 25 million metric tons this fiscal--from 60 million tons in the year ended March 31--as the mineral-rich eastern state of Orissa has suspended all exports, a senior trade body executive said Tuesday.

The move is also likely to hit the domestic iron and steel sector as it could lead to greater imports of more expensive iron ore by steel mills, boosting end-product prices during a period of weak demand.

Orissa's move follows a mining ban in the iron-ore rich state of Goa, while another major producer, Karnataka, has only just begin easing a mining ban. The three states together account for the bulk of iron-ore output in India, the world's No. 3 exporter.

The eastern state is also demanding a total payment of 670 billion rupees ($12.3 billion) in penalties from 103 companies for excessive mining.

"Yes, we have sent notices to mining companies. Representatives of the companies are free to appeal to the state government if they want to," Orissa's Director of Mines Deepak Kumar Mohanty said, but didn't name the companies.

"Orissa is not giving permits to iron-ore mining companies other than for captive mining," Basant Poddar, Vice-President of Federation of Indian Mineral Industries, the premier mining industry body, told Dow Jones Newswires Tuesday. "India's iron-ore production will virtually collapse," he added.

The country's iron-ore production is expected to fall to 100 million tons this year from 160 million tons last year, Mr. Poddar said.

Some of India's top steel and mining companies have operations in Orissa. They include Tata Steel Ltd. (500470.BY), one of the world's largest steelmakers, Essel Mining & Industries Ltd. and Jindal Steel and Power Ltd (532286.BY).

The Orissa government has asked Tata Steel to pay a fine of more than $1 billion for excessive mining, a person with direct knowledge of the matter said.

"We haven't received any notice from the Orissa government yet. We have a small iron ore mine in Orissa, so we are not that worried," a senior Jindal Steel and Power executive, who didn't want to be named, said.

Essel Mining officials couldn't be reached for comment immediately.

Analysts said the mining industry will likely contest the demand for penalties in court.

"Our checks reveal that though most of the measures are not legally tenable, they will trigger a faceoff between miners and the state government," Prasad Baji of Mumbai-based brokerage Edelweiss Research said in a note.

An industry official, who didn't want to be identified, said the demand for penalties may be tough to justify as the charges are related to excessive mining, rather than mining outside permitted areas.


Read more: http://www.foxbusiness.com/news/2012/11/06/india-iron-ore-shipments-to-plunge-as-orissa-state-suspends-exports/#ixzz2BR3YTuh0