Iron ore, chrome rates under pressure on poor demand – by Sadananda Mohapatra (Business Standard – December 17, 2013) [India]

Prices of iron ore and chrome ore are witnessing downward pressure on poor demand from within the country, precipitated by stagnated consumption growth of finished steel products, traders and analysts said.

In Odisha, the major iron ore producing state, the rates have been hovering around Rs 5000 to Rs 6000 per tonne for 62 to 65 grade mineral for last one month. “The rates will stay at current levels for next one month or so. Actually it should be coming down as demand for the mineral is not so strong. But supply problems are supporting the rates,” said an official of Altrade Group, which has five iron ore mines in the state.

Major miners such as Essar and Rungta have rolled over the rates of iron ore lumps from November levels in anticipation of weak demand from sponge iron makers, a major user of the raw material.

“The iron ore rates have been trading at similar levels for past one month due to sluggish demand from sponge iron makers as steelmakers are preferring to use imported scrap instead of sponge iron. The gap between supply and demand has been another reason for weak trend in prices,” said a trade source.

Iron ore miners in Odisha, as per an executive order issued by state government, have to reserve half of their monthly output for consumption of local steel mills, who need about 16 million tonne ore every year, out of 60 million tonne total output of the state.

Hence, while tepid demand from sponge iron plants pressurised the rates, limited supply for out-of-Odisha buyers kept prices supported for last one month, mine operators said.

In global markets, though iron ore rates have gone up recently to trade at three-month high of $140 a tonne, analysts are expecting a correction soon on hopes of better supplies of the steel making raw material.

“It is highly likely that Indian iron ore prices will depress next month from the current levels. This is because prices increased by some miners last month would not be sustainable as the move is putting negative repercussions on the steel players amid weak demand for finished products,” said Ashima Tyagi, senior consultant ( Metals & Mining) with Infraline Energy.

“This is further compounded by the fact that demand from China would also remain low. The reasons include traditionally curbed construction activity during the winter months,” she added.

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