Global iron ore exports range-bound y-o-y; outlook mixed

• Global crude steel production drop erodes iron ore demand
  
  
• Australia exports flat y-o-y, Brazil's up
  
  
• China output curbs expected to impact volumes
  
  

Morning Brief: Global iron ore exports in the first half (January-June, 2023) of calendar year 2023 (CY23) rose a minuscule 2% to 713 million tonnes (mnt) as against 698 mnt recorded in H1CY22, as per data maintained with SteelMint.

Reason for the marginal increase

As individual countries battled their own challenges, the over-arching reason for the flat graph in exports lay in the fact that global demand for steel was still subdued in H1. World Steel data reveals that over January-June, global crude steel production was down 1.1% y-o-y. In particular, two key steel-consuming regions were sharply down. The EU-27 was down almost 11% y-o-y and Europe, Other showed an even deeper 14.1% drop.

Even though energy and gas prices have eased countries are still struggling against inflation and sliding currencies.

But, overall volumes showed a slight increase because, China, the world's largest consumer of iron ore, showed an 8% rise in cumulative iron ore import volumes in H1. This was due to a few reasons:

1) China's crude steel production rose 1.3% y-o-y in H1, as per WSA data.

2) China's domestic iron ore production fell in this period. China, the world's largest iron ore consumer, recorded run of mine (ROM) production at 391 mnt in January-May against 434 mnt in January-May 2022. Although bulk of the production was low grade ore, drop in volumes may have supported increased iron ore imports.

3) Iron ore inventory at major ports have been declining since early this year. The volumes have dropped from over 140 mnt in February to around 125 mnt in June.

Sensing the subdued global demand, global iron ore miner Anglo-American saw a q-o-q drop in production by 4% in Q2CY23 (April-June, 2023).

Country-wise performance

India sees highest increase: India's iron ore exports, although on a low base when compared to Australia and Brazil, the two global iron ore export biggies, saw the highest increase in H1. These rose 74% to 21 mnt against 24 mnt in H1CY22. China is India's largest buyer of iron ore and pellets, which pushed up India's volumes.

Australia volumes flat y-o-y: This country is the world's largest exporter of iron ore with volumes touching 420 mnt in H1, almost flat compared to 419 mnt in the same period in CY22.

Rio Tinto, the world's leading iron ore miner, recorded shipments of 79 mnt in Q2CY23, a dip of 1% y-o-y. Shipments fell 4% q-o-q in Q2 compared to Q1, because of the impact of the planned major maintenance at the Dampier port and a train derailment. But production rose 3% y-o-y and 2% q-o-q in Q2 to 81 mnt.

That apart, production of iron ore pellets and concentrate at the Iron Ore Company of Canada's (IOC's) fell 21% y-o-y to 2.1 mnt in Q2 (April-June, 2023). In June, production was disrupted primarily due to wildfires in northern Quebec and an extended shutdown. IOC is a joint venture between Rio Tinto, Mitsubishi and the Labrador Iron Ore Royalty Income Corp.

Brazil sees moderate rise in volumes: Brazil, the second-highest exporter, saw volumes rise a moderate 9% to 170 mnt in H1 compared to 156 mnt in H1CY22. Brazil's volumes were spearheaded by Vale whose production rose 6% y-o-y in Q2CY23 due to stronger performance at its S11D project and better weather conditions in Minas Gerais. Meanwhile, pellet production increased 5% y-o-y in Q2 on higher production at its Tubarao plants as a result of higher pellet feed production.

Ukraine volumes plunge y-o-y: Amongst the rest of the key exporters, Ukraine saw a 51% y-o-y plunge to 8 mnt from 17 mnt in the period under review.

As per the GMK Center, shipments of iron ore are decreasing amid unfavourable conditions in the EU market. In particular, weak demand for steel is forcing steelmakers to reduce capacity, which in turn is reducing iron ore consumption.

During January-June 2023, iron ore export revenues fell 58.5% y-o-y.

Outlook

WSA forecasts that, in 2023, steel demand will see a 2.3% rebound. If inflation and currency erosions rationalise, then steel demand will possibly be better and pull up iron ore demand and exports in H2.

But, if Chinese authorities tighten the noose on production cuts, then demand may drop.

Meanwhile, Rio Tinto's shipment guidance for the full year of 2023 remains stable at 320-335 mnt. BHP, on its part, has kept its 2023 iron ore production guidance from Western Australia unchanged at 249-260 mnt. Vale's iron ore production guidance remains intact at 310-320 mnt for CY23.