Steel production is a key indicator of activity in global industry and iron ore, the key steelmaking ingredient, is the second most traded commodity around the world after crude oil. The price of iron ore has held up well despite record-setting exports from Australia and a looming flood of new supply through 2017. According to Financial Times, China's iron ore imports rose by 18% in November from a year ago, explaining why prices have risen despite the sluggish global economy. Iron ore prices have staged a remarkable recovery from a depressed level in July, having gained by 19.2% since then and up by 2.6% from a month ago. It is good news for miners because prices are climbing despite increased supply.

However, this does not bode well for Indian steelmakers because India's largest iron ore producer, NMDC Ltd, almost always benchmarks the price of iron ore with international rates. Which translates into this - if iron ore prices go up worldwide, they will also go up in India. Even though India sits on a pile of iron ore, because of a legal ban that's been in force for about two years, supply has dried up. From being a prominent exporter, India is almost on the verge of becoming an importer of iron ore in the short term. So increased steel capacity or greenfield steel projects next year will have to fully rely on sourcing ore from Australia or Brazil, and higher prices of course means steel producers will have to shell out more.