Iron ore prices have been hurtling along in December at an amazing pace even outracing the finished price levels. Whopping 18% growth in December has baffled all market estimates. On the hindsight finished market could creep merely 1%.
Spectacular increase in iron market can be imputed to the following factors
1. Steel mills have bought aggressively in anticipation of improved steel demand with improving economic parameters
2. Improving economic parameters with PMI touching nearly 2 years high
3. USD 157 billion infrastructure stimulus in place expected to generate exponential demand
4. Expected reversal of lending rate in Q1 after the inflation is tamed and the new regime has indicated of more growth driven economy
5. Stocking of steel and iron ore before the Lunar holidays
Despite meager growth in steel prices the growth in iron ore demand has been fuelled not only by an anticipated surge in demand but also by speculation of material becoming dearer before the Lunar Holidays.
An astounding 9% growth in price during this week indicates rapid buying before the winter vacation expecting accelerated price increase after words. Notably fresh transaction of iron ore has taken place but the mills had been hitherto banking on the existing stockpiles. However the iron ore stocks have touched their lowest levels in the last 2 years at 70 million tones thudding fall from nearly 100 million tones about 6 weeks back.
