International iron ore prices are expected to rise, albeit moderately, due to the recent Supreme Court order banning complete mining activities in Goa from Friday.

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The ban is expected to cause a shortfall of almost 45 million tonne of iron ore – the volume that Goa exports every year – from the international market.  Experts say shipments have started drying up already since the state government ordered a temporary hold on mining activities on September 10.

“The export season after the monsoon begins from September 20 or so, but the state’s order has actually led to a complete drop in shipments from Goa since the beginning of the export season,” said Ambar Timblo, MD of Fomento Resources, one of the largest privately held iron ore mining companies in Goa.

But its impact on the price of iron ore is yet to be fully felt due to a slackening in demand from China which consumes almost all the ore exported from Goa.

An analyst with a domestic brokerage said last week: “China is in its eight-day extended holiday period to October 7. Hence, its demand has dropped substantially. But as soon as Chinese demand revives after the holiday, shortage relating to Goa could lead to a moderate jump in prices of iron ore as China will look at other sources.”

China is the biggest consumer and importer of iron ore and any change in the country’s demand dynamics would impact iron ore prices internationally. Owing to a general slackening in demand in China, it had been cutting down production of steel, which requires iron ore as the main raw material. This had put a downward pressure on iron ore since August, which was further intensified by the eight-day Chinese holiday.

According to Bloomberg data, in January 2012, the price of iron ore fines in China stood at $145 per tonne. This came down to $98 per tonne by August-end. Currently, the price is hovering around $105-108 per tonne. It’s very weak as compared to six months back, said the analyst, and added that the ban will finally see some upward correction in the price of the commodity. He said while an increase in prices of iron ore will not have any major impact on the Indian steel companies, miner Sesa Goa, which primarily operates in Goa, will see erosion of topline and bottomline due to the mining ban.

Timblo, who is also a prominent office-bearer of the Goa Mineral Ore Exporters’ Association, said that the state government’s decision to audit all mining operations after imposing the temporary ban on their operations, has led to disruption of sales and transportation of iron ore.

“We are waiting to see the impact as the Supreme Court’s order doesn’t really change anything as no ships are lined up for exports since the start of the season. The SC order only extends the ban,” he said.

Acting on a public interest litigation (PIL) filed by the Goa Foundation, a non-government organisation (NGO), the Supreme Court on Friday stopped all mining operations in the state, including transportation and exports.

The NGO had alleged that despite an order from the state government to stop mining operations in the state, miners and traders were continuing to transport ore from the mines.

But, the September 10 temporary ban had merely ordered a halt to operations in Goa till October. However, it had allowed transportation of ore already excavated. But with the latest Supreme Court order, every ore-related activity in Goa has come to a grinding halt.

The SC has also asked a central empowered committee appointed by the apex court to submit a report on mining operations in Goa within four weeks.

The Justice M B Shah Commission, which was appointed to do a thorough study of all mining activities in the country, in its report had mentioned that illegal mining activities in Goa have led to a loss of Rs35,000 crore to the exchequer in the last 12 years.