IN iron price decline on reluctant CN

Iron ore prices nearly doubled in the nine months from March 2007 due to growing international demand, but major consumer China is now seen easing off purchases.

"About a month ago, there were always seven to eight people in the market competing for one shipment. Now it has hardly come down to two to three," said Rahul Baldota, president of the Federation of Indian Mineral Industries.

He said spot prices of iron ore from India had already dropped to $120 to $125 per tonne from $135 about 10 days ago, adding: "The Chinese are not willing to pay such high prices."

Port congestion in rival exporting nations like Australia had eased, enabling larger volumes and lower prices, he said.

Demand for iron ore from India and other nations had already weakened after Beijing tightened credit, and high costs forced some small mills to shut.

As a result, the landed price of medium-grade Indian iron ore has come down to about $190 a tonne from above $200 in recent weeks.

Existing stocks at Chinese mills and ports will allow them to easily ride out the shortfall, companies said. China imported nearly 100 million tonnes of iron ore in the fourth quarter.

Baldota said that Chinese buyers were also reacting to rumours that India could hike export duties, imposed last year, in the upcoming budget.

India initially imposed a duty of 300 rupees ($7.63) per tonne on all iron ore exports last February, but later cut the levy on low-grade ores below 62 percent iron content to 50 rupees after protests from the local mining industry.

The move initially led Chinese firms to cancel a spate of cargoes, but things improved as a rise in international prices combined with a freight advantage helped Indian firms to blunt the duty blow.

EXPORT DUTY FEARS

India's steel industry has been lobbying for restrictions on iron ore exports, arguing that local firms could run out of raw material supplies in the future.

Glenn Kalvampara, secretary of Goa Mineral Ore Exporters' Association, said raising duties would be "a disastrous move, particularly for Goa state."

Goa accounts for 40 percent of India's iron ore exports, but showed a drop in overseas sale of 12 percent between April-Dec 2007 to 22.5 million tonnes from 25.5 million the year before.

Kalvampara said the fall was largely due to port snags and the temporary closure of 18 mines, which a court found to be operating on temporary work permits.