Iron ore price in mini rally

Back above $90 a tonne after Indian import numbers lift sentiment

Benchmark iron ore gained more than 1% on Wednesday to trade back above the $90 a tonne level, helping to allay fears of a freefall in the price of steelmaking raw material.

According to data from the The Steel Index, the import price of 62% iron ore fines at China's Tianjin port was pegged at $90.30 per tonne, up $1.00 on the day.

On Monday the iron ore price fell below $90 for the first time since early September 2012 and the commodity is still trading down 33% year to date.

On a quarterly basis iron ore hasn't averaged less than $100 since the height of the global financial crisis, but the 2014 second quarter average has now declined to $104.00.

China is responsible for two-thirds of the 1.2 billion tonne seaborne trade and the decline in the price has been blamed on continued signs of a slowdown in the world's second largest economy, combined with a surge in supply.

There was further evidence of soft economic conditions in China this week with foreign direct investment in the country falling 6.7% to the lowest level since January 2013.

China's GDP growth has been declining since 2010, when it stood at 10.4%.

Hopes are high that India, the world's second most populous nation after China, could take over the role of China as the world's growth engine, particularly since the election of a business-friendly party that preside over the country's first majority government since the 1980s.

There is a dire shortage of infrastructure on the sub-continent and the population is urbanizing rapidly, the same conditions that were present before the Chinese economic boom set off a commodity supercycle.

The incoming administration of Prime Minister Narendra Modi which will table its first budget next month campaigned on promises to greatly up investment in the economy.

The Wall Street Journal reports Wednesday that Indian steel giants JSW Steel and Tata are ramping up imports due to a shortage on the local market.

The numbers are still tiny in comparison to China where imports could top 900 million tonnes in 2014 from 820 million in 2013.

But at least for JSW its 500,000 tonnes – sourced from South Africa, Canada and Australia at $91.50 a tonne – represent a record number for the steelmaker and is equal to the total volume India imported all of last year.

This year overall Indian imports is expected to reach between 10 million to 15 million according to estimates from the Federation of Indian Mineral Industries as domestic production continues its long decline to a forecast 125 million tonnes.

The situation today is also a complete turnaround from just five years ago when India's net iron ore exports totaled 120 million tonnes.

Then the Indian industry collapsed amid a government corruption crackdown and miners from the subcontinent all but abandoned the export market.

Image of Narendra Modi addressing Vijay Shankhnad rally in Bahraich from Modi flickr feed