Indian steel producers to live with price volatility in iron ore

Indian steel makers seem to be resigned to price swings in iron ore. Indian iron ore producers take the pricing cue from the global market. Much to the surprise of miners and traders, iron ore prices in swung from an all-time high of $235.55 a tonne on May 12 to slide to 16-month low of about $85 in November.

At the end, the commodity lost close to 30% over January 2021 opening price.

Indian miners closely watch all developments relating to iron ore imports and the more recent steel production discipline in China, which buys more than 80% of its ore requirements from foreign countries, mainly from Australia and Brazil, to have a fair idea of price movements. Globally, some 1.5 billion tonnes (bt) of the mineral find their way to importing countries but mainly to China by sea.

That India more or less follows the global trend is confirmed by periodic ore price revision by the local industry’s bellwether NMDC, whose annual production of around 36 million tonne (mt) makes it the country’s largest miner. As world prices fell, NMDC on more than one occasion lowered its prices.

As recently as December 28, NMDC price for lump ore with iron (fe) content of 65.5% was Rs 4,900 a tonne and that for 64% fe fines was Rs 4,060 a tonne, excluding the levies.

As the New Year has begun, price volatility will continue to mark iron ore trade. According to steel industry analysts, the prime price influencing factor will be Chinese steel production and its use in construction and realty sectors. According to the World Steel Association (WSA), China’s steel production fell as much as 22% year on year to 69.3 million tonnes (mt) in November and the January-November cumulative production was down 2.6% to 946.4 mt. The WSA will make available the December production figure in the third week of this month. It is being estimated that China’s steel output in 2021 would be less than the record 1.065 bt in 2020.

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