China: Pellet imports drop nearly 30%, y-o-y, in H1CY'22 on weak demand

China's imports of iron ore pellets and concentrates dropped 27% y-o-y to 9.33 million tonnes (mn t) in H1CY'22 (Jan-Jun'22) as against 12.82 mn t recorded in the corresponding period last year (CPLY), according to the General Administration of Customs.

Imports moved down y-o-y due to sustained crude steel production cuts, inactive bookings by traders in anticipation of weak demand from Chinese mills and preference for low/medium grade ore on squeezing steel margins.

On a m-o-m basis, the country's imports witnessed a sharp decline of 41% to 0.92 mn t as against 1.55 mn t in May'22.

India remained the largest sources of pellet imports for China at 4.07 mnt in H1 CY'22, as against 4.37 mnt in CPLY. Kazakhstan was the 2nd supplier at 1.12 mnt followed by Australia at 0.78 mnt.

Factors weighing down China's pellet imports-

• Imports from India fall post export duty- Pellet exports from India remained poor, as Indian producers awaited direction from the government on changes the export duty on pellets. Several sources previously corroborated that unless the duty is not removed or reduced, there would be impediments for outbound shipments, given the current low global iron ore prices. The 45% export duty slapped in May impacted domestic prices as export demand lessened.
  
  
• Preference for lumps in China- Demand for pellets was also likely to face headwinds from declining coking coal prices in the international market, as producers preferred lumps over pellet when prices of coking coal dropped.
  
  
• Decline in global iron ore prices: Iron ore prices globally have slumped rapidly over the last few months on continued bearish market outlook. Mills are already reducing production and switching to lower-grade materials to reduce costs; the demand for pellets among Chinese buyers remained weak and no inquiries were received on most days, according to sources.
  
  

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