Prices of iron ore are cyclical in nature. They will go up once the global investment sentiment is more settled and infrastructural development demand from emerging economies arises. - Vaman Kumar
(PRWEB) April 26, 2014
The Supreme Court of India has recently lifted a ban on mining and extraction of iron ore in Goa. The ban was imposed in August 2012 following complaints of questionable mining lease extensions and pollution issues in the iron ore producing state of Goa. While the Supreme Court has ordered a cap of 20 million ton production, this comes as a major reprieve for the industrial sector of Goa. Most of the allied and ancillary industries dependent on mining activity were in doldrums for the past many months following the ban.
According to top sources in the mining industry at Goa, it will take around 6-9 months for them to start production. Most of the iron ore extracted here is export bound. The sentiment of current global steel market is weak. The prices of iron ore in international markets has fallen by over 25% to $110 compared to $150-160 in Q1 2013.
The major reason for falling iron ore prices is attributed to low demand from major steel producing country China. Although, the world steel industry is expecting a turnaround in steel consumption in the medium term, the current market scenario for iron ore remains bearish. Nevertheless, according to commodity expert Vaman Kumar, with the lifting of ban by Supreme Court, there is a mood of optimism and hope for once flourishing mining sector at Goa. “Prices of iron ore are cyclical in nature. They will go up once the global investment sentiment is more settled and infrastructural development demand from emerging economies arises.”
The Chinese government is getting stricter on the pollution norms for their steel producers. This makes the use of low grade iron ore prohibitive for Chinese steel producers. As Vaman Kumar explains “The main challenge for the Indian iron ore producers will be the increased production plan announced recently by Australian and Brazilian iron ore producing conglomerates like BHP Billiton and Rio Tinto.” The Indian exporters will have to compete hard to sell their produce to China since their iron ore grade is inferior compared to their Australian counterparts.
The decision by the top court has lifted the mood on the street. Stock prices of Sesa Sterlite, the largest iron ore miner in the state of Goa witnessed a significant increase. Given India’s importance in the iron ore landscape, a positive sentiment in domestically could be a sign for better things to come globally for the industry.
About Vaman Kumar
Vaman Kumar, is an an industry expert in the field of international trade and global commodity trade especially in the field of iron ore trading. He has been associated with Nordbell Commercial Limited and his interests include Metals, Minerals and Energy in Commodity Trading, International trade, Banking, Finance and Credit and Risk Management.