Indian iron ore exports drop 10% y-o-y in CY'24. Will downtrend continue in CY'25?

• Imports by China fall by 13% y-o-y in 2024
  
  
• Declining Chinese steel production weighs on exports
  
  
• CY'25 outlook to remain bleak for Indian suppliers
  
  

Morning Brief: India's exports of iron ore, excluding pellets, dropped 10% y-o-y in calendar year 2024 (CY'24). Iron ore exports fell to a little under 30 million tonnes (mnt) from over 33 mnt in CY'23, as per latest data available with BigMint.

Shipments had reached a three-year high in CY'23 after the government rescinded a 50% duty on exports of all grades of ore in November 2022. Currently, a 30% duty is levied on exports of iron ore Fe 58% and above.

China remained the top buyer of Indian iron ore in CY'24 accounting for around 94% of total exports. Shipments of predominantly low-grade ore to China were recorded at over 28 mnt. Malaysia and Indonesia were the second- and third-largest importers of Indian ore, although volumes were miniscule in comparison with China.

Among Indian suppliers, the top exporter was Rungta Mines with total shipments of around 7.8 mnt followed by JSW Steel (over 4 mnt) and Vedanta (around 3.3 mnt).

Paradip, Dhamra and Gopalpur ports in Odisha were the major iron ore exporting ports in the year gone by.

Why iron ore exports edged down?

• Chinese steel production falls: China produced 929.2 mnt of crude steel in January-November'24, a decrease of 2.7% y-o-y, as per data published by the World Steel Association (WSA). The decrease in China's steel production basically stemmed from lack of domestic demand, with real estate construction and infrastructure sectors continuing to slow down, as well as declining margins of producers. This was a key reason for the fall in Indian ore imports by Chinese steelmakers.
  
  

• Global iron ore prices drop: BigMint assessment shows that China's iron ore index fell on supply glut in CY'24. Prices of Fe 62% iron ore fines, CFR China, dropped 8% y-o-y to $110/t (on average) from $120/t in CY'23. China's imported iron ore fines spot prices fell amid high inventories at ports and poor domestic steel demand. Narrowing profit margins of mills prompted increased BF maintenance shutdowns and reduced molten iron production, which dampened demand for iron ore.
  
  

Declining global iron ore prices was obviously a disincentive for Indian suppliers looking to channel higher cargoes into the Chinese market. Moreover, China's iron ore imports from India fell by 13% y-o-y in CY'24 while overall imports increased, which points to the fact that dwindling global prices enabled Chinese buyers to source low-grade ore at competitive prices from countries other than India.

• High port inventories: Notably, China's iron ore imports from key countries increased by around 5% y-o-y in CY'24 despite declining crude steel production. Traders stockpiled ore at ports as a buffer against a potential surge in prices. As of 2 January, iron ore inventories at Chinese ports were assessed at 148.7 mnt, as per Steel Home data. Higher port stocks naturally discouraged imports.
  
  
• Lower exports from Karnataka: Exports from Krishnapatnam port fell from 3.95 mnt in CY'23 to 1.7 mnt last year which impacted total export volumes. Tighter domestic supplies amid extended monsoons resulted in lower production in the state which weighed on export volumes.
  
  

Outlook

As India's iron ore exports are overly dependent on Chinese market sentiments, it is expected that the export market may remain under pressure in CY'25. This is because China's steel demand is forecast to fall a further 1% this year, as per WSA, if stimulus measures fail to trigger economic momentum. Amid growing threat of tariffs clouding China's steel export prospects and continued weakness in domestic demand, crude steel production may fall in CY'25, thereby directly impacting iron ore demand.

In the short term, Chinese mills would be looking to curtail production ahead of the New Year holidays starting 28 January and high port stocks will remain a drag on imports.

Global iron ore prices are also projected to edge down amid higher supplies, with forecasts pegging the average price for benchmark fines to settle at around $90/t in CY'25. Weak prices are likely to further disincentivise exports by Indian producers.