Mining giants reap the benefits of India's iron ore ban

A court-ordered ban on iron ore production in India is helping to boost spot prices as well as providing global mining giants with extra supply opportunities.

Fairfax reports that the ban on mining imposed in India's key iron ore states due to recent furor over corruption scandals has been a blessing for overseas producers, with giants such as Rio Tinto (ASX/LSE/NYE:RIO) and BHP Billiton (NYSE:BHP) picking up the slack and expanding their market share.

According to analysts the supply shortfall created by the Indian production ban has tightened the market and lent major support to iron ore, following a year which saw spot prices plunge due to ailing Chinese demand.

The ban on production in the key iron ore states of Goa, Karnataka and Orissa was prompted by the recent proliferation of illegal mining, which according to a judicial investigation has seen $6.2 billion in black market ore make an exit from Goa alone.

While efforts to lift the prohibition in Goa flounder, demand from China continues to rise following a year of slowing economic growth. Stimulus spending on infrastructure projects in 2013 should further raise Chinese iron ore demand, with analyst Hu Yanping of expecting total demand of 770 million tonnes as compared to 718 million tonnes in 2012.