In what could be a sign of strength for ferrous scrap pricing, India’s government has added a fee to iron ore exports to take advantage of what it sees as strong demand for the steelmaking ingredient.
According to a report from Industrial Info Resources (IIR), Sugar Land, Texas, India’s 5 percent increase in its iron ore export tax will be felt most by China. That nation’s steelmakers declined to renew yearly iron ore supply contracts and are instead buying on the spot market.
India, which supplies about 20 percent of China’s iron ore imports, has reportedly increased the duty on iron ore fines from 0 percent to 5 percent and upped the duty for lump ore from 5 percent to 10 percent.
The IIR news report says the cost of the Indian tax raised the average price of spot market iron ore to $112.10 per metric ton, about 50 percent higher than contract prices agreed for the 2009 buying season (which is still in effect) between the big three miners and Japanese and Korean steel mills.
Regarding 2010 pricing, some analysts have predicted an increase of 15 to 20 percent for upcoming 2010 contract iron ore prices, following a 33 percent reduction won by Japanese and South Korean mills in 2009.
But observers are now forecasting a rise in contract iron ore prices between Chinese mills and the mining firms (BHP Billiton, Rio Tinto and Vale). Such increases are pointing to a strong steelmaking market in Asia as “further recovery from the global financial crisis occurs,” according to IIR.
An ongoing rise in spot iron ore prices and surging Chinese steel production continues is likely to mean good news for iron ore-producing countries such as Australia and Brazil as well as for ferrous scrap recycling companies in exporting nations like Japan and the United States.