Global seaborne iron ore exports rise 5% y-o-y in Jan-June'24. Will trend continue in H2CY'24?

*Chinese imports up 6% y-o-y despite flat-to-negative steel output

*Australia sees weak exports growth, Brazil ramps up shipments

*High Chinese port stocks, steel output curbs to weigh in H2CY'24

Morning Brief: Global seaborne iron ore export volumes reached around 786 million tonnes (mnt) in January-June 2024 (6MCY'24) compared with 751 mnt in the corresponding period of last year - an increase of roughly 5% y-o-y, as per provisional data collated by BigMint which represents approximately 98% of the global seaborne market.

Iron ore trade volumes increased despite global crude steel production remaining largely flat: World Steel Association (WSA) data shows that crude steel production in January-May stood at over 793 mnt in the 71 countries reporting to WSA - a negligible decline of 0.1%. June numbers are awaited.

Leading exporters

*Australia's exports increased by a feeble 2% y-o-y in 6MCY'24 to around 427 mnt recovering somewhat in Q2CY'24 after falling by 1% on the year in Q1. Earlier in the year, shipments had been affected due to a combination of weather disruptions, maintenance and capital works at key operations such as the closures to Rio Tinto's Dampier and Walcott ports due to cyclone Olga and disruptions to loadings at Port Hedland. Shipments increased as the Australian fiscal year drew to a close in June. Australia had exported 855 mnt of iron ore in 2023.

*The world's second-largest iron ore exporter, Brazil, increased shipments by 6% y-o-y during the review period, although the pace of growth slackened after a 12% increase seen in Q1. Vale, which accounts for over 80% of Brazil's iron ore production, achieved growth in output, thanks to increased production from the S11D mine in the Carajas region, as well as the Southern System. Brazil's second-largest exporter, CSN, too, increased exports. Vale has a production guidance of 310-320 mnt in 2024.

*While South Africa and Canada increased shipments by 3% and 10%, respectively, India's exports climbed 20% y-o-y in 6MCY'24 to inch close to 26 mnt on higher domestic iron ore production, high global ore prices for the better part of Q1 and interest from China for low-grade iron ore amid shrinking steel margins.

*Ukrainian exports increased by a remarkable 100% y-o-y to nearly 17 mnt on a low base due to the ongoing war in that country and also due to the fact that since the beginning of the year, Ukrainian mining companies have been gradually increasing their exports of iron ore facilitated by the opening of a maritime export corridor.

*Shipments by Sweden dropped sharply by around 34% y-o-y to just 9 mnt during the review period due to successive derailments in end-2023 and again in February 2024 on the single-track railway or Malmbanan - Swedish for iron ore line - from Kiruna in Sweden to the Norwegian port of Narvik.

Top importers

*China's iron ore imports are expected to have reached around 615 mnt in 6MCY'24, an increase of over 6% y-o-y despite the country's crude steel production dropping 1.4% y-o-y in January-May and by over 7% y-o-y in March and April. China, roughly, has a share of 75-80% in the global seaborne market. Following a drop in China's portside inventories to around 20% below historic averages in the December quarter of 2023, stockpiles have been rebuilt to levels above the long-run average and this inventory restocking at ports triggered strong imports in H1. Current portside stocks are assessed at around 149 mnt. Easing of this inventory depends largely on significant stimulus for the property and real estate markets but at least it creates a buffer against future price volatility. China imported 1,180 mnt of iron ore in 2023.

*Both Japan and South Korea witnessed declines in iron ore imports of over 2% and 5%, respectively, in 6MCY'24 as steel production slowed down in both countries during the review period. In January-May, South Korea's steel production dropped by over 6% while Japan's output shrunk over 2%. Weakness in the construction sectors of the two advanced economies amid high material prices and a property financing crisis in Korea were the major factors, not to forget weak shipbuilding exports that also weighed on steel production amid stagnant domestic demand.

*Interest rates, inflation and energy prices continue to affect steel production outlook in the EU. But as inflation eases some idled capacities since 2022 may have come onstream. This, coupled with positive signals in the automotive sector, explains the marginal growth in iron ore imports by leading countries within the bloc such as Germany and the Netherlands.

Outlook

Global iron ore trade in 2023, BigMint data shows, increased by 5% compared to 2022 to 1.59 billion tonnes due to a slight rise in Chinese steel production in the absence of any clear output limit fixed by the government. Despite the growth in shipments in H1 this year, seaborne trade volumes may remain flat y-o-y in 2024 as many Chinese provinces are drawing up production restriction plans and also due to very high portside inventories. Ex-China demand, however, especially from Southeast Asia, is expected to remain strong.

On the other hand, mine ramp-ups in Australia and Brazil promise higher supplies in H2CY'24 which can have an adverse impact on prices.

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