Despite Iron Ore Stockpile Fire Sale in India's Goa, Ban Remains

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India’s Supreme Court allows the sale of old iron ore from Goa, but analysts are not too hopeful of it commanding a good price because of today’s ground realities.

In what’s been interpreted as the penultimate step in the final clearance of the ban on the mining of iron ore in India’s famous tourist State of Goa, India’s top court has permitted the sale of over 11 million tons in an ore stockpile.

The news of the Supreme Court (SC) of India ruling caused confusion initially as some thought the ban on mining had been lifted. Soon, clarity dawned that the court had merely allowed the auction of the ore that had been mined over a year ago, but had remained unsold because of the ban. The halt in mining in Goa, remains.

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So what’s the near-term outlook?

Following an enquiry by a commission of enquiry, the SC had stopped all mining in one of India’s largest iron ore exporting states last year. That decision has slashed output and shipments from India, once the world’s third-largest exporter with over $7 billion a year of iron ore being sent to countries led by China.

The unsold ore is low-grade material not suitable for most Indian steel mills. A Reuters report said the volume is a fraction of the 1.1 billion ton iron ore export market, so will not have much of an impact on international prices.

The report, quoting a commodity analyst at Macquarie, said China today had tougher environment regulations so mills would be looking out for better-quality ore.

Spot iron ore prices have dropped since then, even as China comes to terms with slower economic growth, factors that could affect the sale of the Goa ore.

Post-ban, some of the world’s top miners the likes of Rio Tinto and BHP Billiton had stepped into the space created because of India’s inability to export ore.

But the decision to e-auction the year-old ore is expected to bring in some relief to Goa miners, per se, including the Vedanta group firm Sesa-Sterlite. The latter would produce about 14 million tons of ore a year from this state before the ban hit its operations.

Sesa-Sterlite was formed by merger of Sesa Goa and Sterlite Industries, and it has tried to balance its losses from the iron ore business by its operations in oil & gas, zinc, lead, silver, copper and aluminum. Sesa Sterlite reportedly sits on about 2.5 million tons of iron ore.

Know where steel, copper and aluminum are headed: check out MetalMiner’s forecasting capability.

And check back in as we keep up on the iron ore export ban.

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