Indian iron ore exporters positive after news of Vale hike
Reuters reported that Vale’s demands for an unprecedented mid cycle hike in term iron ore prices could stem a slide in the Indian spot market, which offers cheap supply for Chinese mills seeking to undermine the Brazilian miner’s position.
Mr Rahul Baldota president of Federation of Indian Mineral Industries said that “Indian ore should become attractive for China, if Vale asks for a rise over their contractual price. Then the market may come back to India. But the reality is the market is still bad. There is virtually no demand as of now.”
Mr Zou Jian chairman of China Metallurgical Mines Association said that “Right now, Vale’s iron ore prices are more expensive than other ores in China considering the freight rate. Chinese mills pay higher for the Vale’s ores because of the long-term supply agreement. If they cut the supply and terminate the agreement, Chinese mills can pay less. That would be good.”
Spot prices for Indian ore in China are now almost equivalent to Vale’s term price. That’s a sea change from the last few years, when the price for lower quality spot cargoes was well above that of better quality term ore.
The spot market for Indian iron ore imports to China has dried up over the past 6 to 7 weeks, wilting in the face of closures by Chinese steel mills, high port stocks, a hike in Indian export taxes and competition from other exporters. Spot prices in China have dropped by 12% in the last month, offering Chinese mills a lower quality but cheap alternative to term iron ore from Brazil.