Iron ore prices will remain under downward pressure as new capacity comes onstream, and resuming idled operations will simply prolong the trend, said Investec analysts Wednesday.
A resumption of Indian iron ore exports aided by a decrease in duties on lower-grade ores will likely further add to oversupply in the market, the bank said.
"What the world does not need now is more iron ore," Investec said.
A reduction of the export duty on ores grading 58% Fe and below to 10% from the previous 30% rate could potentially add 10 million mt from port stockpiles onto the seaborne market, sources said Monday.
Some analysts see prices as still too low to attract exports, with one stating Goan exporters needed a further increase of around $17/dmt. Platts assessed IODEX 62% Fe at $61.25/dmt CFR China on Wednesday, up from a low of $47.50/dmt a month ago.
In Canada, provincial government support, including infrastructure investment, to help find an operator to resume the Bloom Lake mine idled by Cliffs Natural Resources may be economically unnecessary, Investec said.
"Such government action to support high cost iron ore producers is likely to prolong what appears increasingly likely to become a multi-year long depression in iron ore prices," the bank said. "Current iron ore prices are sending a powerful message -- iron ore capacity has to permanently close in order to rebalance supply and demand."
Indian miner Sesa Sterlite in February restarted mining in Karnataka after a government ban was lifted, and from Goa wants to recommence exports after the monsoon. The group has been allocated an interim annual mining quantity of around 5.5 million mt of saleable ore in Goa.
The Vedanta Group unit has renewed licenses for mines with a pre-ban 15.3 million mt/year capacity in Goa.
"We expect iron ore prices to remain under pressure following a production expansion into what now appears to be a contraction in demand," Investec added.
Source: Platts
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