The seaborne iron ore market crashed to an all time low of USD 44/mt level for Fe 62% Fines, CIF China, in early July 2015 on falling Chinese steel prices and increased low cost supplies from large iron ore miners.
The prices already fell by 33% YTD (year-to-date) after falling by 46% in 2014. Some analysts are anticipating spot iron ore prices may fall below USD 40/mt in 2015 on anticipated fall in Chinese steel production and increased supplies of Iron ore from miners like Rio and Vale.
Will Indian Steel makers benefit?
In this scenario, Indian steelmakers are likely to benefit as lower prices in global market will keep Indian domestic iron ore prices under pressure.
Indian iron ore imports surged an all time high in FY15, when Indian apex court restricted mining in some of the crucial mines in May 2014 due to non renewal of year old leases. However, with amended MMDR (Mines & Mineral Development and Regulation) Act in 2015 gives a transition period for closed mines to operate for 5 years in case of merchant and 10 years for captive mines.
Out of India’s total iron ore production of 127 mnt in FY15, captive miners contributed over 30%, where as merchant share was around 70%.