Will This Little-Discussed Restart Worsen the Iron Glut?

Two months of project work winding up–now back in the saddle at home.

One critical event stands out this month–in the global iron ore sector. Where further problems may be looming on the supply front.

That’s because of events this week in one of the world’s premier producing nations. India–a place that the market has largely forgotten about, but which could become a major dark horse affecting worldwide prices.

Officials from India’s Goa state said this week that iron ore mines here are very close to restarting. With individual mines potentially reopening as early as March.

That’s a critical development. As recently as 2011, Goa was India’s top exporting region for iron ore. But mines here were idled in 2012, when government officials uncovered widespread evidence of miners operating without permits. Officials also found numerous cases where mines were infringing on the local environment and populations.

Since then, Goa’s iron ore output has been reduced to near zero. But it appears the problems have now largely been addressed–paving the way for mines here to reopen.

Last Thursday, the Goa state government officially revoked its 2012 ban on mining. With officials saying that mining companies will now be allowed to restart operations once they have the proper operating permits in place.

The government stated that mining could resume as early as several weeks out. Although local operators such as Sesa Sterlite have said they may be ready to start mining within two weeks.

If we do see a widespread resumption of mining, the implications for global iron ore supply are significant. At its peak prior to the mining ban, Goa was exporting some 50 million tonnes of iron ore yearly–equivalent to about 5% of worldwide export supply.

That would be a lot of material returning to the market. At a time when prices have already slid more than 50% over the last two years–to current levels below $70/tonne.

Watch for news on individual mine restarts here, and resulting figures on just how much supply we can expect out of India–and when it will arrive.

Here’s to being back,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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