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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Iron Ore Output is Kind Of Restarting Here

Lots of focus on China this week. With reports emerging that the State Reserves Bureau there may have just purchased as much as 350,000 tonnes of copper.

Investors pay a lot of attention to this massive metals market. With the news having moved copper prices upward by several cents over the last few trading sessions.

It's interesting then that analysts have almost no focus on another key market: India.

I've been talking a lot about how changes in India are driving the thermal coal market. And this nation may also be quietly shaping another major commodity--iron ore.

A few years ago India was the third-largest exporter of iron ore globally. But that status has quickly shifted--driven by production bans in key mining regions like the state of Goa. Where regulators have moved to stop environmental and social damage caused by widespread illegal operations.

That's had a material affect on the global supply-demand balance. Endangering some 100 million tonnes of export capacity.

But it looks like changes are now coming--that may signal a shift back toward increased iron ore production here.

Last week, India's courts ruled that iron ore mining can resume in Goa. Raising the possibility that supply will start coming from this region for this first time since September 2012.

The output won't be as strong as before, however. With the court imposing a production limit of 20 million tonnes per year. That being less than half of the production Goa put out in the fiscal year ended March 31, 2011.

This may be the (slow) start of India getting back on its feet as an iron ore producer and exporter. Adding some slack to the global market, and potentially having a dampening effect on prices.

We'll see how quickly output recovers--and to what scale. If you're in iron, this is the place you should be watching.

Here's to ironing it out,

By Dave Forest


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