Indian iron ore export shipments hit over 3-year low in Aug'21

India's iron ore export shipments witnessed a significant fall in the absence of firm Chinese buying interest. Export shipments stood at 0.45 million tonnes (mn t) in Aug'21 as against 2.05 mn t in Jul'21, according to the vessel line-up data maintained with SteelMint. Shipments have fallen to over three-year lows since 0.3 mn t seen in Feb'19.

Factors behind decline in Indian iron ore exports

• Subdued Chinese demand on steel production cuts:As per data maintained with SteelMint, Jul'21 saw the first y-o-y decline in China's crude steel production, which was slightly higher than the level seen in the same period in 2019, indicating that steel producers have significantly reduced their capacity under the pressure of production cuts. In July, crude steel output was 86.79 mn t, a y-o-y decrease of 8.4%. Hence, decreasing steel output has kept demand for raw materials depressed.

  The Chinese market demand continued to remain subdued amid rising production cuts.Nine mills in north-east China have received production cut notices recently. Mills in Shandong province have been ordered to complete their annual production target by end-Nov'21 as assessments and corrections are planned for Dec'21.Towards the beginning of the last week, more production cuts were implemented in Guangxi, as production restrictions continue to be rolled out.
  
  

• Widening discounts on low-grade ore:A major Australian iron ore miner has increased the discount for sub-grade iron ore or super special fines (SSF) on the back of falling overseas demand and steel output cuts in China. According to sources, the company has increased the discount for SSF for Aug'21 to 27% against 22.5% in July. Further, the miner has increased the discount for SSF for Sept'21 to 30%.
  
  
• Falling realisations in exports:As per SteelMint's assessment, Fe 57% Indian iron ore fines prices fell from $96/t CNF China in early August to $71/t CFR China towards end-Aug'21. The falling export realisation kept Indian exporters inactive in the market.
  
  

Indian iron ore exports to China fall 80% m-o-m

China continued to remain the largest importer of Indian iron ore in Aug'21 with 0.40 mn t, down 80% as against 2.05 mn t seen in Jul'21.

Exports to Japan and Korea remained nil as NMDC's long-term export contracts expired at the end of last fiscal. NMDC's long-term iron ore export contracts with Japanese steel mills (JSMs) and South Korea's POSCO have been scrapped as its key sop of a reduced 10% export duty has been removed as against the normal 30% paid by private iron ore exporters.

Shipper-wise exporters in Aug'21

Rungta Mines was the largest iron ore exporter at 0.13 mn t in Aug'21, down 81% as against 0.70 mn t seen in Jul'21. Bagadiya Brothers was the second-largest exporter at 0.08 mn t.

Shipper-wise Indian iron ore exports in Aug'21 versus Jul'21

Qty in t, provisional data,
Source: SteelMint Research, Customs

Port-wise Indian iron ore exports:

In Jul'21, Paradip Port accounted for 43% of the monthly exports at 0.20 mn t (down 75% m-o-m) followed by Dhamra Port with 0.08 mn t and Vizag Port with 0.07 mn t.

Outlook
Several Chinese mills were said to be shutting down blast furnaces or planning maintenance, and ended up with excess iron ore cargoes, loading August and September, to offer in the spot market. The construction steel market has also turned negative in China, weighing on iron ore demand, due to poorer-than-expected real estate investment and concerns over the spread of the delta variant in China.This may continue to keep the Indian iron ore exports market weak.