China surges as top buyer of Indian Iron Ore, driving exports to record levels

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China surges as top buyer of Indian Iron Ore, driving exports to record levels

China surges as top buyer of Indian Iron Ore, driving exports to record levels

Industry News
Jan 03,24

Iron ore serves as a crucial feedstock, primarily utilised by China in steel production. Interestingly, India competes with China globally in the market for finished steel products such as hot rolled coils.

China surges as top buyer of Indian Iron Ore, driving exports to record levels

China has become the leading purchaser of iron ore from India, importing nearly 24.75 million tonnes (mt) during the eight-month period from April to November, marking a remarkable 400% year-on-year increase, according to sources from various ministries. This export volume represents the highest to China in absolute terms in the last three years and the second-highest since FY20.

Data indicates that approximately 95% of India's iron ore shipments for the current fiscal year have been directed to China, with minimal quantities going to Indonesia, Malaysia, and South Korea.

Concerns have been raised by India's steel manufacturers regarding the influx of steel shipments, which could impact domestic market dynamics and prices. Notably, India has transitioned to being a net importer of steel, reversing a three-year trend.

Export trends to China have witnessed a substantial increase over the past five years. From 18.15 mt in the first eight months of FY20, constituting 76% of total shipments, the volume surged to 35.19 mt in FY21, representing 92% of the total, marking the highest in absolute numbers. Shipments dropped to approximately 90% at 17.23 mt in FY22 due to Covid-related restrictions affecting trade and supplies.

In the last fiscal year, India supplied only 5 mt, yet this accounted for 72% of the total exports of 7 mt during the same period, as reported by consultancy firm BigMint (formerly SteelMint). Export duty imposition is believed to have impacted Indian numbers last year, while FY21 was considered one of the best years due to robust global steel demand.

A trade source noted that iron ore prices remain elevated this year, driven by Chinese demand, experiencing a significant rally since August. China has also increased its purchases of this commodity from Australia and Brazil by high single digits.

The narrative surrounding iron ore prices has defied investor expectations, climbing almost two-fifths since May. Contrary to global expectations, China has not implemented production cuts in steel-making despite concerns about non-recovery in the property sector and a slowdown in government infrastructure projects, contributing to the persistent increase in iron ore prices.

Trade level data reveals that prices for this essential ingredient in steel have surged by 30-35% over the past seven months, reaching $130-135 per tonne, according to sources like Argus. Currently, China faces a situation where it has accumulated excess steel stocks, facilitated by high iron ore purchases, and is exporting these stocks abroad, including to countries like India. The decline in the yuan against the dollar has further boosted steel exports.

Source: Business Line