Monsoon end to up iron ore supply, pressure price

By Ruchira Singh

MUMBAI (Reuters) - Iron ore prices are seen under pressure by mid-September, when India's retreating monsoon brings exporters of fines back to the market, hungry for profits after a break of nearly four months.

India's iron ore fines, which comprise almost 90 percent of its annual exports of 106 million tonnes, are not shipped during the rainy season from June onwards, as the powdery commodity tends to absorb moisture.

Iron ore fines producers said they expect to resume exports by mid-September when the rains start to withdraw, hoping for a revival in Chinese demand by then.

"There are big companies that would be under pressure to show quarterly profits," said Haresh Melwani, chief executive of HL Nathurmal & Co, a miner and exporter in the western Indian state of Goa. "This could pressurize the market but there are other miners who could hold out for better prices."

One analyst said prices could dip by $10 a tonne from current levels across all grades as miners, particularly those in Goa, have low mining costs and by virtue of being close to the port, incur low transport costs. They could afford to sell at lower prices.

"A fundamental correction is expected because of a flood of iron ore expected post monsoon," said Pawan Burde, vice president for research at PINC Research. "I think it could come down to the level of $80-$85 (per tonne C&F for 63.5 percent iron content) in the next four weeks."

Iron ore demand from China has flagged with prices softening to $95 a tonne C&F for ores with 63/63.5 percent iron, after a nearly one-year peak of $115 early this month.

If China's lack of interest persists, it could aid a price fall in the next few weeks.