Indian export offers for high grade iron ore fines (with Fe content of 63.5 percent and higher) have been rocked by volatility, with prices declining sharply by $5/mt to the range of $49-50/mt CFR China as both shocked buyers and exporters made a hurried retreat, traders said on Friday, July 10.
"The Indian iron ore export trade has been caught in a perfect storm. Traders have been buffeted by offers plunging to a new low and buyers pulling out anticipating the crash will gain momentum," an Orissa-based miner-exporter said.
"The crash was triggered by unwinding of over-bought positions in the global futures market. Thereafter, reports of stocks at Chinese ports showing signs of an increase for the first time in four months, contagion fears of a Chinese stock price meltdown, and hints of payment defaults in Indian markets have added momentum to the downslide," the trader said.
"The market had been expecting offers to edge lower to levels of around $47/mt, but in the last quarter of the year. The downslide has been too sudden," the trader said.
Market sources said that, though offers have rebounded by around $4-5/mt from a weekly low of $44/mt, the gains are unlikely to be sustained.
Sources said that unconfirmed reports of some payment defaults from buyers have also depressed market sentiment.
Pointing out that the credit crunch in the Chinese steel industry, soft product prices and rising stocks have removed any possibility of restocking by Chinese steel mills, the sources said that most traders and miner-exporters have been preparing themselves for a prolonged bearish cycle.
A section of the market has maintained that, unless current offer levels rebound and stabilize at around $55/mt, Indian exports of iron ore fines will start to dry up as current prices offer negative margins to exporters.
In any case, only a few traders with existing stocks are concluding minor transactions to maintain cash flows and most miner-exporters have pulled out of the market, an Orissa-based trader said.