Indian iron ore prices should soften to $55-$60 a tonne free-on-board by December from about $80 currently, an official at the Federation of Indian Mineral Industries (FIMI) said on Monday. Prices would extend a recent fall as Chinese steel mills are expected to have reached a price agreement with major suppliers by then, FIMI president Rahul Baldota said.
"Prices have shown a falling trend since the past one week," he told reporters on his last day as head of the industry body. "Eventually the spot prices have to be on par with long-term contract prices."
The projection of $55-$60 a tonne took into account the few long-term deals struck around those levels, especially by Japanese mills, even as big China mills remained deadlocked in talks with suppliers, incoming FIMI head Siddharth Rungta said. China, the world's largest steel maker, made an iron ore pact with upstart Australian miner Fortescue Metals Group on Monday, but questions remain regarding deals with top producers such as Rio Tinto and BHP Billiton.
India is China's third-biggest iron ore supplier. FIMI data showed that of production of 223 million tonnes of iron ore in 2008/09 (April/March), Indian firms exported 106 million tonnes, up 1.4 percent from a year earlier.
Baldota said exports should be of a similar amount in 2009/10. "Supply of iron ore is not an issue, but logistics is a problem... we can sell more," Baldota said, adding FIMI would be opposed to any hike in duty designed to curb iron ore exports. "Any hike in export tax has to be absorbed by us. The Chinese buyers are not going to bear the hike," he said. Baldota also said the industry did not support moves to link royalty rates on iron ore to market values. "We are against the proposed ad valorem royalty but favour a hike in fixed royalty," Baldota said.
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