THERE could be more good news on the way for those punting on iron ore price increases, after India banned mining of the steelmaking raw material in one of its key producing regions. And Goldman Sachs has boosted its 2011 Chinese steel production growth forecasts, leading it to predict a current global iron ore supply deficit could stretch into 2014.
Trade reports say the Supreme Court of India banned mining in the Bellary district of Karnataka province to prevent environmental degradation from illegal mining.
The district, which produced 25 million tonnes of iron ore last year, supplies local steel mills.
However, any shortfall in production is expected to flow on to India's 90 million tonnes a year of exports.
There were no details of how long the ban would be in place, but some reports speculated it might only be for a week.
Goldman Sachs analyst Malcolm Southwood said even if this were the case, it would be fair to assume the crackdown on illegal mining would continue to hamper production.
"We will review our 2011 export assumptions as further details emerge but we see downside risk to export volumes as a result of recent developments," he said.
Goldman boosted its forecast 2011 Chinese steel production to 704 million tonnes from a previous estimate of 691 million tonnes because of high rates of production in May and June.
It is predicting global iron ore deficits of 18 million tonnes, 61 million tonnes and 30 million tonnes in 2011, 2012 and 2013, respectively, before a surplus of 80 million tonnes in 2014.
"The notional surplus in our model for 2014 could potentially be erased by a combination of project/expansion delays, and the cushion of high-cost domestic iron ore production within China," Mr Southwood said.
Index prices from June to August, the three months from which the fourth quarter's iron ore prices will be set by some miners and steel mills, were averaging $US174 a tonne, according to Goldman.
"Recent prices, therefore, imply some upside risk to our current fourth-quarter contract price assumption of $US165 a tonne," Mr Southwood
