Advocating restrictions on the exports of iron ore fines by India, Credit Analysis and Research Limited, (CARE) has warned that reserves will likely last only 28 years if exports are continued at the current rate.
India, overall, has iron ore reserves which could last for about 38 years if exports are curtailed, CARE claimed. The continued export of fines could bring the reserve down by a decade.
CARE estimated that India’s domestic iron ore demand will grow at a CAGR of about 7 percent. The total annual iron ore requirement in the country was expected to reach a level of about 169 million tons per annum by the end of FY18.
Forced to conserve, India imposed a 5 percent duty on exports of iron ore pellets in January, much to the consternation of the iron ore mining sector. Iron ore pellets were previously exempted from any duty.
CARE now expects significant pellets and sintering capacity addition for domestic steelmakers. Sintering and pelletisation capacity, is likely to increase from about 60 and 54 mtpa as recorded in FY13 to about 80 and 92 mtpa respectively, during the next 3-4 years. The expanding agglomeration capacity of the sintering and pelletisation plants in the domestic market also supports our view on the curb of exports of iron ore fines.
CARE said most of the ore projects in India were likely to come online in the next couple of years, with supply from these mines hitting the global markets during CY14 and CY15. It also said the average global iron ore prices were set to witness a long phase of decline owing to the shift of global seaborne trade into a prolonged oversupply.
During the short-term, however, while prices were unlikely to decline much owing to robust supply expected to be available in the late second half of CY14, CARE said it predicts a “significant decline” in prices during CY15 as the new mines will operate at full capacity for the whole year. Global annual average iron ore prices were likely to hover around US $110-120 per ton in CY14, and were likely to fall further, hovering at around US $85-95 per ton in CY15.
On the supply side of iron ore, the rating agency said the ore industry was likely to see oversupply in 2015 as many new mines are likely to be operational by then.