Monday Market Monitor - Iron Ore - Small rebound seen

The decline in Indian iron ore FOB east Coast prices, after remaining stable for 3 weeks since April 10th 2009, have started to recover since April 27th.

This would be music to Indian miners after drought of almost 70 days since the last peak on February 10th 2009. But it is not certain that the upward trend would stick as some market analysts foresee this change as an aberration.

Indian iron ore fines FOB East coast of India

Change is on May 1st 2009 as compared to April 24th 2009
Change is in INR per tonne

Singapore based Freight Investor Services, who provide iron ore related services including Swaps trading and future price visibility, have outlined following factors responsible for this upturn.

1. Australian miners, who were very aggressive on the Chinese iron ore spot market with discounted prices, are reported to be going a bit slow, thus propelling demand from India as a counterbalance and pushing Indian spot prices

2. Chinese buyers, due to the incoming rainy season in India, which would stop loading on Western Coast of India and dampen shipments from East Coast due to higher moisture content, are trying for shipments before onslaught of rains

3. Despite huge inventories, some of the mills and traders, with higher priced positioned parcels, may like to average out with lower priced buying

4. The general sentiment in China regarding steel demand has improved a little bit off late and thus Chinese steel mills are restarting their purchases from all the sources including Indian cargoes

However towards the fag end of the week iron ore Fob levels exhibited correction by up to 3% for the weekend the hike was skewed in favour of lower grade ores from Fe 58/57% to Fe 61/60%.

The lop sided correction is primarily due to enhanced demand of lower grade Iron ore from India vis-à-vis higher grade which the Chinese buyers prefer to source from Australia and Brazil due abundance of superior quality.

The Iron ore stock at major Chinese port as on April 30th 2009 was 68.83 million tonne out of which Indian share is 17.47 million tonne.

1. Lower grade Indian iron ore spot FOB prices jump by 3% - April 25

2. Indian iron ore fines FOB prices up turn seen - April 30

On the other hand, spot prices of some of the grades of Indian domestic iron ore at Bellary also exhibited marginal increase.

Domestic

Change is on May 1st 2009 as compared to April 24th 2009
Change is in INR per tonne