Global iron ore exports stable y-o-y in Q1CY23, but China factor to watch out for

• India's volumes spurt post-export duty roll-back
  
  
• Australia, Brazil exports stable, SA still feels strike impact
  
  
• China's production cuts may impact offtake this year
  
  

Morning Brief: Global iron ore exports stood at around 340 million tonnes (mnt) in the first quarter (Q1) of calendar year 2023 (CY23) compared to 339 mnt recorded in Q1CY22, as per data maintained with SteelMint.

Reason for the flat export graph

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 subdued in Q1. Countries struggled against inflation and eroded currencies even as gas and energy prices rationalized in this quarter.

Country-wise exports

India sees highest increase: The highest volume increase was seen from India as exports were ramped up significantly post-the duty rollback in November last year. It may be recalled the Indian government had slapped a 50% tax on exports of iron ore lumps and fines of less than Fe58% and 45% duty on pellet exports in an attempt to secure supply for local needs. Thus, data reveals that India's Q12023 iron ore exports surged a whopping 86% to nearly 12 mnt against 6.25 mnt seen in Q1CY22.

Australia's volumes stable y-o-y: Australia, by far the largest exporter of this steel-making raw material, saw its volumes remain more or less stable at 205 mnt, a nominal 2% growth over 202 mnt reported in Q1CY22. While one of its key miners posted a rise in production, another showed a drop. For instance, mining behemoth BHP reported a 12% q-o-q decline in iron ore production on account of a fatal accident in February at one of its mines and also a planned logistic de-bottlenecking. Sales dropped in Q1 y-o-y as well as q-o-q. On the other hand, the world's leading miner, Rio Tinto, recorded an 11% y-o-y increase in Q1CY23 production to 79 mnt and 16% y-o-y rise in shipments.

Brazil sees nominal rise in volumes: Brazil, the second-highest exporter, saw volumes rise a mere 3% to 75 mnt in the quarter under review compared to 73 mnt in the same quarter last calendar. Brazil's volumes were spearheaded by Vale whose Q1 production rose a nominal 6% y-o-y on the back of fairly strong performance at one of its mines and conducive weather conditions at another. However, its Q1 sales dropped 11% y-o-y.

Strike hangover at South Africa: Exports from South Africa fell 11% y-o-y in Q1 to 15 mnt from 17 mnt in Q1CY22. A strike at national rail and ports logistics major Transnet in October last year had long-term ramifications on South Africa's miners. According to the South African Association of Freight Forwarders (SAAFF), the 11-day strike in October last, called to protest wage increase proposals, caused South Africa to lose the opportunity to move R65.3 billion worth of goods while some warn the country can recover from the strike only by 2023.

Imports: China volumes rise

China, the world's largest consumer of iron ore, saw its imports of the same rise 10% y-o-y in Q1 to 294 mn compared to 268 mnt in Q1CY22, as per data released by the country's General Administration of Customs.

China's crude steel production rose 6.1% to 261.60 mnt over January-March, 2023, as per worldsteel data, which necessitated higher iron ore imports.

China has rolled out a slew of stimulus measures, particularly in the property segment, as part of efforts to boost the economy post-the severe second Covid surge last year. The economy is still in the early stages of recovery, although, overall, there is a semblance of stability.

CY22 scenario

In 2022, leading exporter Australia saw volumes at 864 mnt. Brazil's annual volumes inched down 4% to around 346 mnt while third-largest player South Africa's exports dropped 14% to 58 mnt.

India's exports of the ore nosedived 58% on the back of the export duty to 16 mnt.

As per secondary sources, total iron ore trade in 2022 touched 1,459 mnt.

Outlook

Mining heavyweights like Rio Tinto, BHP and Vale have kept their production/shipment guidance unchanged for CY23. For instance, 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.

However, Australia's iron ore exports are expected to remain volatile amid uncertain Chinese demand for raw materials since the government has now officially unveiled production cut directives.