Iron ore prices are expected to remain elevated over the near and medium terms owing to supply-side constraints coupled with a robust revival in demand after the Covid-19 restrictions which led to demand shocks, according to a report by India Ratings and Research (Ind-Ra).
The Ind-Ra report said that the domestic supply shortage was largely owing to the delays in ramping up of mines in Odisha after their auction last year and the unviable premiums paid by new investors in bidding for new mining leases.
At the same time, measures taken by central and state governments to address the short supplies of raw materials are unlikely to be sufficient in meeting demand in the near term, the report said.
It predicted that supplies will improve in the mid-term but prices will remain elevated due to structural changes in the cost of mining as the new mining lease holders paid high premiums at the auctions to secure the leases. Furthermore, global supply will remain constrained by supply disruptions in Brazil and South Africa, the Ind-Ra report said.
The report stated that the fundamentals of pellet manufacturers were conducive for growth given high domestic realizations led by strong demand and limited supply and also high demand for ex-India pellets in overseas markets.