Mumbai: India’s iron ore prices fell on Thursday from a week earlier as Chinese buyers stayed on the sidelines in hopes of lower prices, but this did not signal that demand was waning, dealers said.
“Demand is high but Chinese buyers are saying ‘let us close the market for one week and then get the lower prices´,” said Thinesh Paul, chief executive officer of Elze Srini Group of Companies, a small exporter based in the southern Indian state of Tamil Nadu.
Paul is among hundreds of Indian exporters who ship out about 100 tonnes of iron ore a year, or half of India’s total iron ore output mainly to China, a gauge of global ore demand.
The Federation of Indian Mineral Industries (FIMI) said ores with 63.5 iron were quoted at $66-$68 a tonne FOB, down from $70 last week.
Most Indian deals are done on a spot basis and current prices are a crucial benchmark internationally for upcoming yearly term negotiations in the new fiscal year to begin in April.
Asian steel firms are calling for the first cut in anuual iron ore prices in seven years as they struggle with steel prices that have tumbled since late last year, as the global economy stagnates in the grip of a worsening financial crisis.
An executive in a large exporting company said the drop in prices was temporary and demand remained strong.
“There was some slackness (in demand) last week but it has picked up on Monday ... I don’t think prices will go down much,” said the executive from Essel Mining & Industries Ltd.
“It can go down another $2-$3 a tonne and can go up again. The market should remain stable till April.”
Agreeing, RK Sharma, secretary general of FIMI, said: “It is not that hectic as it was a few weeks ago. And that is because steel prices in China are coming down again.”
Demand had slowed in the second half of 2008 as Chinese steel mills reduced their intake after the Olympics in August, but picked up in December and remained stable.
In January, India’s iron ore exports were up 21.5 % at 13.99 million tonnes from a year ago. Exports in April to January, the first 10 months of the current fiscal year stood at 78.46 million tonnes against 79.67 million tonnes the year before.
“I am not sure if we will be able to end the year (in March) with the same exports as last year,” Sharma warned.
Chinese demand is showing some signs of revival, and the country is still growing economically even as other large economies slide towards recession amid the global crisis.
Reflecting that resilience in demand, Fortescue Metals Group, Australia’s No 3 iron-ore miner, will quadruple iron ore sales to an arm of Chinese steel maker Hunan Valin Iron and Steel Group, now its second-largest shareholder.
Fortescue said on Wednesday it would ship up to 4 million tonnes a year to Valin subsidiary Xiangtan Steel from 2010 onwards, up from 1 million tonnes a year now, once it expanded.
And last week Brazilian miner Vale, the world’s biggest iron ore producer, said it was expanding its client base among Chinese steel companies, locking in long-term, benchmark supply contracts.
China is Brazil’s single biggest customer for iron ore.