The global iron ore market may be oversupplied for as long as half a decade, keeping prices under pressure, according to billionaire Anil Agarwal’s Vedanta Ltd., which plans to fight back by raising the quality of its output amid a global shift toward higher-grade material.
Supply will exceed demand for the next three-to-five years, keeping prices between $50 and $60 a metric ton for ore with 62 percent iron content, according to R. Kishore Kumar, chief executive officer of the company’s iron ore division.
Weak prices and the rising preference for higher-grade supplies by China is hurting miners on India’s western coast, which ships out most of the nation’s lower content ores, he said in a phone interview from Goa.
The global market is in a state of flux, with lower-grade ore increasingly shunned in favor of better-quality material that’s less polluting as China seeks to clean up its environment.
BHP Billiton Ltd., the largest mining company, says there’s a new reality as the flight to quality boosts the premium users will pay for higher-grade ore. The trend has gathered pace as benchmark prices gyrated this year, with the commodity falling into a bear market last month.
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