A coke factory worker stands next to a coke battery oven at the ArcelorMittal steel plant in Kryvyi Rih, Ukraine, in March 2019.
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Expect iron ore exports out of India to remain low as the world’s fourth largest producer reserves more than the commodity for its own use, said commodity intelligence service Kpler.
“India’s iron ore exports … have disappeared in recent months. And this is enough to show that domestic consumption is very strong,” said Reid I’Anson, senior commodity analyst at Kpler, who added that this will continue throughout the year. .
India’s iron ore exports fell 90% year-on-year in October last year, and recorded a year-on-year decline of 96% in September.
India produces 9.2% of the world’s iron ore. Australia is the largest producer, accounting for about 35% of global supply, followed by Brazil and China.
“India will be the leading economy in terms of growth by 2023… And I think exports from India will remain weak and will also use domestic production.”
20% rally?
The decline in India’s commodity exports comes as China’s reopening of Covid sent commodity prices soaring, and I’Anson predicted that a “20% upward movement” in iron ore prices was on the table.
62% grade iron ore last traded at $123.37 a tonne, up about 30% since December when China announced it was withdrawing from “zero-Covid” measures.
Cast iron is mainly used to make steel, an important material in construction and engineering projects – and two Asian countries are on track to use more.
“You have received the return of consumers in China, which will drive durable consumption, and you will see improvements in the property market there,” I’Anson said.
Factory plate factory Jindal Steel and Power Ltd. in Raigarh, Chhattisgargh, India, on February 11, 2015.
Udit Kulshrestha Bloomberg Getty Images
According to Refinitiv, about 60% of global iron ore exports go to China.
“Downstream demand in China is starting to show some signs of optimism based on government support especially for the construction sector, which is the country’s largest steel-using sector,” Tamara Thorne, senior analyst at Refinitiv Metals Research, told CNBC.
The same request is expected for the neighbors.
“We expect steel consumption in India to grow faster than seen in the first nine months of the financial year (in 2022),” said Seshagiri Rao, joint managing director of JSW Steel.
How long does it take?
Federation of Mineral Industries of India general secretary, BK Bhatia, said he believes iron ore exports in 2023 will be more than exports in 2022. Iron ore exports from India are subject to a 50% tax on low grades. iron ore exports, which reversed at the end of November.
But while India’s iron ore exports have risen since December as a result, the move may not be sustainable, according to Kpler’s I’Anson. He stressed that exports will not return to the levels seen in 2020 and 2021.
“The extent to which loadings have been taken up recently is likely not sustainable for a very long time,” he said.
India’s iron ore exports will not be the biggest factor in price volatility.
Workers working in a stainless steel tool workshop in Chennai on April 30, 2022.
Arun Sankar Afp | Getty Images
“The biggest swing factor is the ability of Rio Tinto in Australia and Vale in Brazil to operate to the limits of their supply chain,” said CLSA research analyst Robert Stein.
Both iron and steel power plants expect annual average production on the lower side, and a 5% increase in the bullish scenario.
“Working capital has stabilized but remains slightly elevated with commodity price volatility, higher raw material prices and global supply chain pressures,” mining giant Rio Tinto said in its fourth-quarter production results.
China is another big factor.
“Demand is still affected by China’s property deleveraging program and while in certain weeks, positive sentiment may push prices higher, [but] in order to reach that level, we need to see widespread property stimulus or support,” Stein said.