India’s Iron Ore Exports Hit as China’s Demand & Imports Plunge

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(Image Courtesy: Bloomberg)

India’s iron ore exports fell by 21pc in the 2017-18 financial year that ended 31 March, hit by weak demand for low-grade fines in China. Exports fell to 24.38mn t in 2017-18 from 30.72mn t in 2016-17. Exports of iron ore fines, concentrate and lump fell to 15.04mn t from 21.88mn t over the same period. India mostly exports low-grade fines to China.

But Chinese mills are making robust profits and so have focused buying on high-grade, mainstream ores, with deepening discounts even on high-quality, medium-grade fines such as Fortescue’s SSF fines and blended fines.

Indian Bureau of Mines (IBM) estimated the iron ore production in the country in the current fiscal at about 210 million tonne, 9 per cent more than the previous fiscal. Last year, the country had produced 192 million tonne of iron ore.

The projection of higher production has come as a relief to the steel industry which was feeling jittery over disruption in mining operations in Odisha and Goa during the year and its subsequent impact on the iron ore prices. Odisha, which produced 102 million tonne iron ore, 53 per cent of the country’s total iron ore output of 192 million tonne last year.

India’s Supreme Court suspended iron ore mining in the coastal state of Goa from 15 March, which will sharply reduce fines exports in 2018-19. Goa set a court-mandated production limit of 20mn t/yr. It could take several months for mining to resume in Goa, as new auctions of mining leases and fresh environmental clearances may be needed.

India exports around 2mn-4mn t/yr of high-grade fines through government-to-government contracts with Japan and South Korea. Exports of high-grade fines are mostly unviable because of a 30pc export duty.

But India’s exports of pellets increased to 9.34mn t in 2017-18 from 8.84mn t in 2016-17 because of strong demand from China, where environmental restrictions have lifted demand for direct-charge material such as pellet and lump. Pellet supplies have remained tight in China since operations at the Samarco iron ore mine in Brazil were suspended in November 2016 following an accident.

(Image Courtesy: Pinterest)

Continued environmental checks and restrictions in China, especially on sintering and pelletizing equipment, are likely to keep demand for Indian pellet robust in the near-term. Demand for low-alumina pellet is stronger than for supplies with high alumina content, as alumina penalties have rose sharply over the past few months.

In FY17, India’s trade deficit with China expanded to USD 51.11 billion from USD 38.72 billion in FY13. Structural reforms in China reduced its imports from India. Commerce ministry data showed on Tuesday that the US emerged as the top export destination for India with USD 47.9 billion worth of shipments in FY18. However, China was India’s largest source country for imports during 2017-18 with USD 76.3 billion worth of imports.

Items like ores, cotton, organic chemicals mineral fuels copper, iron and steel, nuclear reactor and mechanical appliances, electrical machinery and plastic make it to the list of top export items from India to China.

(References: Argus, Financial Express, Business Standard)

Sea News Feature, June 6