India's iron ore exports hit 4-month high in Oct'24 amid China boosters. Trend to sustain?

• Increased global iron ore prices lend support
  
  
• Higher steel prices prop up ore export offers
  
  
• Fresh Chinese fiscal stimulus may boost exports
  
  

Morning Brief: India's iron ore exports (excluding pellets) hit a four-month high in October 2024 at 2.16 million tonnes. The last comparable levels were seen in June's 2.75 mnt. On m-o-m basis, October volumes catapulted 50% against 1.44 mnt in September, although, y-o-y, these dropped 11% compared to 2.43 mnt in October 2023.

China continued to lead the charts with 1.54 mnt, consuming 71% of the total ore exported by India in October.

What factors pushed up exports in Oct'24?

• Chinese stimulus gives fillip to ore intake: China's total iron ore imports in October received a fillip from the stimulus measures announced in the third week of September. Total imports of the raw material rose 4% m-o-m in October to 104 mnt while those from India were also up in this period. It may be recalled the People's Bank of China (PBOC) announced a suite of heavyweight measures to boost the economy, and especially the ailing property sector. These included cuts in the mortgage rate for existing housing and the reserve requirement ratio by half a percentage point amongst other steps. The PBOC governor said, the reduction in existing mortgage interest rates is expected to benefit 50 million households in reducing their interest expenses by an average of about RMB 150 billion per year, which will efficiently boost consumption and investment. These measures led to emergence of positive sentiments in the property sector and a consequent surge in iron ore and other steel-making raw material prices.
  
  

• Hike in global iron ore prices: Global iron ore prices rose in October due to some reasons. First, consequent to the increase in Chinese appetite for iron ore on the back of the stimulus package, spot global prices of this raw material headed north by $12/t m-o-m to $105/t CFR China. The fact that the dragon is the largest guzzler of the same, accounting for 50% of the global consumption, supported this hike. Secondly, in a knee-jerk reaction to the stimulus measures, export offers for the Fe 57% grade fines that China typically imports from India returned to $60/t levels in October after falling to $50/t in September. Thirdly, the increase in steel prices, again in response to the China stimulus, went up, further supporting global iron ore prices, a factor that encouraged Indian ore exports. Lastly, Chinese restocking ahead of the Golden Week holidays led to a spike in ore prices, which Indian exporters further cashed in on.
  
  
• Improved margins encourage higher production: Chinese mills saw a slight improvement in their margins amid a rise in steel prices in October, which also stimulated them to stock up on iron ore. For instance, Chinese HRC October offers spurred by 12% m-o-m to $519/t FOB. Similarly, HRC prices in Tangshan in October rose 11% to RMB 3,655/t ($511/t) against September's RMB 3,298/t ($461/t) while rebars were also up 11% at RMB 3,678/t ($514/t) from RMB 3,325/t ($464/t) m-o-m.
  
  

The rise in steel prices encouraged higher hot metal production. In October, the average daily hot metal output of mills under Mysteel's survey rose 4.5% m-o-m. As many as 35 BF mills resumed production, creating the need for additional ore, fuelling imports from India.

Outlook

With China arming itself with a fresh set of fiscal measures on 8 November, to bolster its flagging economy, the global commodity pricing dynamics may shift in tandem in the near term. The measures aim to keep the economy secured against the Trump administration's possible further tariff/non-tariff curbs. On Friday, China's top legislative body, the National People's Congress (NPC), approved the State Council's proposal to increase local government debt limit by $839 billion. This is being deemed as China's "most powerful debt reduction measure in recent years" and one that "can better develop the economy and protect people's livelihood, going forward". These measures will possibly have another positive impact on China's and global steel and iron ore prices and also ensure ore export volumes from India remain buoyant in the short to medium term.