Iron ore market is hotting up in India. Following a rise in shipping freight rates and railway charges, iron ore prices (high grade) in the spot market have touched a record high of $175 a tonne.
Another reason for the price rise is increased demand from China. The rise in demand is due to port congestion in Brazil and Australia, the top two iron ore suppliers to China.
Federation of Indian Mineral Industries (FIMI) said the port congestion has led to increase in shipping freight rates.
The freight rate for Indian iron ore has touched $46 a tonne in October from $35 a tonne in September, up 28 per cent.
According to FIMI, ships have to wait for a longer period at the Brazilian and Australian ports. The port congestion at these countries has impacted the freight rates due to slow movement of ships.
Exporters are paying more surcharges to the Indian Railways since the last 30 days. The Indian Railways has increased the yard congestion surcharge on iron ore by 11 percentage points to 35 per cent.
This is the second hike in yard congestion surcharge this year. The busy season surcharge has also gone up to 7 per cent from 6 per cent.
Shipping freight prices and local railway prices are both included in the international spot iron ore price. Chinese steel mills, however, are still buying Indian iron ore because of the huge demand.
During November every year, the Chinese steel mills negotiate the iron ore prices for long term lease with Brazil, Australia and India. Prior to the leasing, the mills tend to increase their stocks through spot trading. Consequently, they are willing to pay a higher price before the negotiation begins.
During September, the iron ore price was $155 a tonne as against $140 a tonne in August. Last fiscal, China accounted for 84 per cent of India’s total iron ore exports of 92 million tonne.