Indian export offers for high grade iron ore fines (with Fe content of 63.5 percent and above) have continued to slide down, falling by $3/mt over the past week to $90-91/mt CFR China amid concerns over weak global steel markets and the negative impact of increased royalty rates in domestic iron ore mining, traders said on Tuesday, August 26.
"The softening of steel prices in China has caused the markets to be wary of weak global prices. Chinese steel mills are continuing to operate with the lowest levels of raw material inventories, resulting in negligible interest of buyers in Indian fines," an Orissa-based miner-exporter said.
"Local miners have also been reluctant to conclude transactions for large volumes as they are yet to gauge the impact of the increase in royalty rates announced by the government. Weak demand and offers will not enable them to pass on higher rates to buyers," he said.
Last week, the Indian government increased royalty rates on iron ore mining payable to provincial governments where mining operations are located from 10 percent to 15 percent of the pithead value of the ore.
Market sources said that the higher royalty rate could raise the cost of production of fines by $3-4/mt and, with global prices down by as much as 30 percent in the current year, export margins were being squeezed at current offer levels.
As a result, miners and traders have been reluctant to conclude transactions for large volumes at low margins and have been concluding small volume bookings only to maintain a market presence among their longstanding buyers' network, sources said.