Financial Daily from THE HINDU group of publications
Tuesday, Nov 01, 2005
Financial Daily from THE HINDU group of publications Tuesday, Nov 01, 2005 |
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Agri-Biz & Commodities
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Minerals Iron ore outlook positive for 2006 G. Chandrashekhar
Mumbai , Oct. 31 FOR 2006, the iron ore market is looking tight. China's demand for imported iron ore is expected to grow strongly again next year. However, there is a cat-and-mouse game between sellers and buyers over pricing next year's supplies. Despite Chinese assertions that prices would fall, the outlook for iron ore looks positive. Caught between the twin-desire to secure material for the longer term and at lower prices, the Chinese may, eventually, settle for longer term supply security rather than lower price, according to experts, who said the main argument made for lower prices centred around growth in supply rather than slower demand. It is forecast that China's iron ore demand will grow by 70 million tonnes (mt), of which 45 mt would be imported. However, there is difference of view between buyers and sellers over supply of seaborne iron ore. While miners assert that insufficient new mining capacity will be available next year, the Chinese believe there is plenty to go around. Chinese are pushing for lower contract prices next year arguing that supply of seaborne iron ore will be plentiful (62 mt of new material), while major miners believe it would be lower (50 mt). There are a number of arguments and counter-arguments advanced by sellers and buyers on prices for next year, experts remarked. According to reports from China, spot Indian iron ore prices remain at $69 per tonne (cost and freight), as Indian mines refuse to sell below $55 per tonne (gap between the two prices is filled by freight cost), and demand remains firm at this price level, despite the mills' increasing desperation over their mostly negative processing margins.
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