With the announcement of hike in export duty on iron ore fines to 20% from previous 5% in the Indian budget the cat was finally out of the box. The market reacted tepidly. In fact spot prices bulked by another 1% signifying the already mellowed sentiments.
Most of the Chinese mills already decked up with raw material (stock pile touching 81 million tonne) and the prices of finished steel in domestic market receding with each passing day owing to lack of demand the thrust is unlikely to bulge.
The chances of absorption of additional export duty of about USD 20 per to USD 25 per tonne, with minor flutter, can not be ruled out as
1. The Chinese domestic steel demand is coming under pressure due to tightening by the government resulting in weakening of prices, which simulate mood for iron ore buying
2. The current FOB levels of USD 170 for 63.5%/63% are higher by almost USD 70 per tonne compared to prices prevailing as on March 1st 2010, thus giving enough space to miners
Thus, it seems the prices of iron ore will not reflect the hike in export duty in the short term until the domestic prices pick up in China.
The only upside for Indian miners is that if Chinese buyers panic and rush to the market to secure volumes causing tightening in supply and a reversal of the current price downtrend.
The freight rated also maintaining a negative trend. Capesize continued to run on a low track. BCI (Baltic’s Capesize Index) reached 1,319 points, down 123 points WoW. BPI (Baltic’s Panamax Index) hit 1,813 points, down 191 points WoW.
(Source: www.Steelguru.com )