Chinese Buyers Demand Discount on Indian Iron Ore

Surging coking coal prices are prompting Chinese steel mills to opt for higher grade iron ore inorder to boost efficiency and uses less coal, forcing low grade Indian iron ore sellers to offer deep discount to attract buyers.

The sharp rise in coking coal and coke prices upto the level of USD 236/MT, FoB Australia has drifted interest of Chinese buyers to look for alternative that uses less coal.

Indian iron ore sellers are not getting market to sell their material as Chinese buyers prefer using high grade ore instead low grade inorder to decrease coal usage.As a result, Indian cargoes are trading at a discount of upto 20% against Platts index.

Apparently, Indian fines are not preferred until it has been offered at much cheaper price or more than Australian material.

Prime reason behind less preference given to Indian fines is the excess supply from Australia and Brazil. The iron ore glut in China and surge in coking coal prices in recent months has made it harder for low grade material to enter into the Chinese market.

It is to be noted that steel production using lower-grade iron ore, which contains higher impurities like silica and alumina required a higher consumption of coking coal and coke in blast furnace as compared to using high grade iron ore.

India, a major exporter of iron ore to China has exported more than 70% of low grade iron ore fines to China. In FY17, till Sept'16, India has already exported 5.3 MnT iron ore to China.