Iron ore prices are expected to be elevated over the near-mid-term due to supply-side constraints clubbed with a simultaneous robust revival in demand post Covid-19 led demand shocks, India Ratings and Research said on Wednesday.
In its iron ore market review, the agency said the domestic supply shortage is primarily driven by a delay in the ramp-up of Odisha iron ore mines post auctions in March 2020 due to the high, unviable premiums and Covid-19-led disruptions.As per the review, various measures have been taken by the central and state governments to address the short supply, but they are likely to be insufficient in meeting demand over the near term.
Further, it predicted a slight softening of prices, once supply improves, it would remain at elevated levels due to the structural change in the cost of miners paying premium, it said.
The global supply side has also been constrained by the supply disruptions in Brazil and South Africa."Conversely, both domestic and global steel production levels have been on the rise post Covid-19 disruptions. Domestic production has improved since 2QFY21 with output reaching pre-Covid levels,".