The Hindu Business Line : Share of India, Australia in iron ore market expected to increase

THE shares of India and Australia in the global iron ore market are expected to increase this year, thanks to their proximity to China and rising freight rates.

China, the largest market for iron ore, is estimated to have increased its imports by 36 million tonnes (m.t.) last year to 148 m.t. and this is expected to rise further by 20 m.t., according to the Australian Bureau of Agriculture and Resource Economics (Abare).

"The rising cost of transporting iron ore to China will also increase the incentive to lift domestic iron ore production, despite inferior quality iron ore reserves. Even with higher domestic production in 2004, imports are forecast to rise," Abare said in its Outlook 2004.

Beyond 2004, the incentive for domestic production in China was expected to decline as freight rates were seen dipping. "China's iron ore imports are forecast to rise by around 40 per cent (68 m.t.) over the next five years, to reach 235 m.t. in 2009," Abare said in the report. Due to rise in Chinese demand coupled with requirements from other Asian and European markets, iron ore delivery has been negotiated for delivery at a price higher by 18.62 per cent over prices last year.

The demand growth and prospect for further rise in ore prices have encouraged producers to go in for significant investments in new iron ore capacity. Abare said though Indian iron ore costs were relatively high, increasing freight rates in 2003 and its proximity to China had helped to support its competitiveness. "The Steel Authority of India Ltd has announced plans to increase ore production to 30 m.t. a year by 2012 from the current level of 23 m.t.

Another State-owned operator, the National Minerals Development Corporation, is planning to increase capacity by three m.t. a year with the opening of two mines," Abare said.