Iron Ore Prices Slump 10% In India.

The Multi Commodity Exchange of India (MCX) has received permission from the commodity markets regulator, the Forward Markets Commission, to launch an iron ore futures contract in Mumbai.

India`s metal and energy exchange MCX has already commenced trading in iron ore futures. This is the country's first commodity exchange to launch the contract. MCX's iron ore contract is designed to be the true benchmark of the Indian iron ore fines export market.

Iron ore is one of the most important commodities in the world today with increased demand being witnessed from steel mills.

``The MCX iron ore futures contract will give all market participants an opportunity to hedge their price risks against the volatility of the physical market,'' MCX's managing director Lamon Rutten said.

India is the world's third-largest iron ore supplier and plays a significant role in the global iron ore industry.

India had an estimated annual production of around 226 million tonnes in 2009-10, according to data from the ministry of mines, government of India. It exports over 130 million tonnes of which a large portion account for exports of ore fines.

``MCX's iron ore futures contract will go a long way in creating a market-driven benchmark for the entire industry and also for those nations importing iron ore from India, mainly China, which is the world's largest importer,'' the official added.

Meanwhile, an official of Sesa Goa said that iron ore prices dropped by 10% between February and March. ``The percentage drop from mid February to mid March is between 10-15%, depending on the grades, where lower grades have got a bigger hit than the higher grades,'' said P K Mukherjee, managing director of Sesa Goa.

He added that demand had been robust for the past two-three years, especially from China, whose field demand is quite aggressive and strong.

However, iron ore prices in China have come down over the last few days following a slow down in demand due to the devastating earthquake in Japan, the world's second largest steel maker after China.

Meanwhile, India's union government increased export duty on iron ore fines four-fold to 20% in the budget proposal for 2011-12, in a bid to discourage exports and conserve the material for use by the steel makers within the country.

Iron ore spot prices in Orissa, a leading producer of the ore in the country, has slumped and may fall by at least 6% within the next two weeks because of the new export duty that comes into effect from April 1.

Currently better quality iron ore is priced at $160 per tonne at Paradeep port. Traders and exporters feel the prices may come down by $10 to $150 per tonne by the end of this month. After the announcement in the budget, iron ore shipment contracts have taken a hit, exporters said.

Source : mineweb.com