Iron ore prices will remain "soft" in the second half due to over-supply and subdued demand even as cost of the raw material dropped to its lowest in over five years, Vedanta Resources CEO Tom Albanese has said.
"I think that the fundamentals of supply and demand would lead to soft prices in the second half of the fiscal," said Albanese, who was earlier CEO of world's leading iron ore miner Rio Tinto.
Iron ore prices nosedived to its lowest since September, 2009 to a little over USD 76 per tonne due to an oversupply situation in the market primarily because of the weak demand from the Chinese steel mills, which produce almost half of global production.
"China's steel production growth is slowing. It is not dropping but the rate of increase is slowing.
"Combine that with the new iron ore production coming into the sea-bound markets, particularly from Australia and Brazil. These are having the collective effect on softening prices and those effects are likely to continue in the second half," Albanese told PTI.
Albanese said that as the environment of lower demand was likely to continue and the over-supply will lead to softening of prices.
"These are the same reasons which are driving oil prices lower," he said.
A senior executive of a public sector iron ore producing firm, however, differed, saying that rising cost of production would make operations unviable for many global mining companies if prices fall further.
"In that case, global supply would decline leading to an increase in the prices. I think, prices have bottomed out and it will only go up further in the coming days," he said.
After holding prices for four straight months, NMDC has reduced by Rs 200/tonne the price of iron ore lumps, mostly used by Indian steel makers, to Rs 4,400 a tonne for November. However, it kept prices of fines, which has less iron content, at the previous month's level at Rs 3,160 a tonne.
Source: Business Standard
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