International iron ore prices have belied any prophecy by its undulation in the last quarter of 2009 nonetheless a definite correlation can be observed on circumcision of the movements in Chinese steel market.
In the pre Lunar Holidays (25th -31st Jan’09) period international prices exhibited buoyancy owing to the frenzy among the steel manufacturers in China pumped up by the stimulus package of USD 585 billion, but it took less than a week for this hallucination to vanish in the post-holiday period as prices started to fall that reached 18%. (Grade Fe 63.5/63%) since 10th February’09.
However the same pattern is missing from Indian domestic Iron ore prices which have remained remarkably steady as shown in the following tables from Steel Guru:
Experts in the industry say this trend has happened for the following reasons:
1) A spurt in the demand of sponge iron from small furnaces as they have progressively increased percentage of sponge iron in the input composition vis à vis scrap primarily as a fall out of uncertainty in the availability and prices of scrap. The longer lead time in delivery has hardly helped their cause.
2) 4% depreciation of INR to USD, thereby having an incremental impact on the import cost of scrap.
3) Curtailed rake availability, for Iron ore dispatches, cramping its availability in the short run.
However the continuance of this honeymoon depends largely on events in the international arena . An extended depressed phase in the Chinese market is likely to have similar ramifications on the domestic prices as the immoveable volumes will ameliorate the availability lest the miners drastically prune their production.
Source: Steel Guru
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