Indian iron-ore prices are expected to surge another 15-20% even as prices during the year-end have recovered by 30% to 50% depending on the grades. NMDC Ltd chairman Rana Som told FE that while the prices of iron- ore with more than 64% ferrous content have already gone up from around $59-61 per tonne to $117 (free on board) per tonne, prices are expected to climb further by 15-20%.
?Demand in spot is very high and this will drive the long-term demand, too,? Som said. Although in India there will be a marginal increase in demand, from around 85 million tonne to around 90 mt, China will drive the global demand growth with a demand increase of 11-12%. In fact, demand in the US, Japan and UK will remain stable but Chinese demand will continue to grow for the next five years at least at a rate above 10%, Som said.
According to Raw Materials Group of Sweden director Magnus Erricsson, although China will drive the demand growth with its steel production expected to touch 565 mt in 2010, it will not be in a position to claim higher price cuts because there?s been a control on pricing with the two mining giants BHP Billiton and Rio Tinto joining hands.
In fact, the Steel Index?s benchmark price, which soared to $112 per tonne from $97 a tonne last week, clearly indicated that China?s say in price negotiations with global miners has weakened. ?BHP Billiton and Rio Tinto have started cooperation on the production side. The two companies will together have control on one third of the total value of iron-ore mined globally,? Erricsson said. In 2008, iron-ore mined globally stood at $125.55 billion, he added. However, India that supplies nearly a fifth of China?s iron-ore imports, has increased export duty on iron ore lumps from 5% to 10%. The country has also imposed a 5% export tax on iron-ore fines. This is likely to impact volumes of exports from India with a fall by around 4.5%, an NMDC official said.
Indian iron-ore fines were sold to China at a record $119-121 a tonne last week. NMDC, he said, would bank on the Chinese demand growth and their inability to claim big cut in prices.
Although Som did not clarify whether NMDC?s iron-ore production would go up in 2009-2010, he said the company could produce much more than what it is producing at present.