India's iron ore and pellet exports rise nearly threefold in H1FY24. Know why?

*Exports reach nearly 19 mnt from around 7 mnt in HIFY23

*Shipments rise sharply on low base due to export duty in FY23

*Exports may fall in Q3FY24 on China steel output cuts

India's iron ore and pellet exports have almost trebled to 18.6 million tonnes (mnt) in April-September 2023 (H1FY24) from 6.9 mnt in the same period of last fiscal, SteelMint data shows. While iron ore exports were recorded at 14.7 mnt, pellet exports stood at nearly 4 mnt.

Pellet exports at present do not attract a duty, while a 30% tax is levied on exports of iron ore of grade Fe58% and above.

Key destinations

Out of the total 14.7 mnt of iron ore exports, China alone accounted for 14.5 mnt. Similarly, over 87% of India's pellet exports went to China. Total pellet exports to China stood at 3.4 mnt.

Indonesia and Malaysia were the other Asian neighbours which sourced iron ore and pellets from India, although volumes were no match to those of China's.

Top exporters

Vedanta and Rungta Mines were the leading exporters of iron ore with volumes assessed at 2.9 mnt and 2.7 mnt respectively in H1FY24. JSW Steel, too, exported over 1 mnt of iron ore during the period under review.

On the other hand, Rungta and State-owned KIOCL were the top exporters of pellets at 1.2 mnt and 0.8 mnt respectively. BRPL and AM/NS India were the other leading pellet exporters.

Why exports shot up?

Duty impact in H1FY23: The imposition of 50% export duty on iron ore of all grades and 45% on pellets in May last year led to a sharp in drop exports, which fell to nil in September 2022. The duties were rolled back in November last year. Therefore, exports in H1FY24 rose sharply on a low base.

Rise in domestic production: India's iron ore production rose by 15% in the first eight months of this year, while pellet production increased by 10% in H1FY24. Higher production volumes have enabled domestic miners to serve export markets despite a surge in domestic steel demand.

Higher exports from Karnataka miners, Lloyds: The Supreme Court has lifted restrictions on sales and exports from Karnataka - the third-largest iron ore and second-largest pellet producing state in India. SteelMint reported that many miners and producers in Karnataka have received export permits. Hence, higher shipments were seen from miners in the state. On the other hand, Maharashtra-based Lloyds Metals and Energy exported over 0.5 mnt of iron ore in H1 after receiving EC for a 10 mnt/year mine in March. The company's iron ore production increased by 280% y-o-y in H1.

Hike in global iron ore prices: Benchmark Fe62% Australian fines prices have risen to around $120/t CFR China from around $100/t in August on supportive real estate policies in China, higher crude steel production, and low port inventories. A high-priced steel raw materials market scenario naturally encouraged higher exports by Indian producers. Also, high ore prices dented the margins of Chinese steel mills encouraging imports of low-grade iron ore.

Outlook

Probable steel production cuts in China in Q3 of the ongoing fiscal are likely to lead to lower imports of iron ore and pellets from India. However, production controls may not be stringent, as the Chinese government cannot afford to compromise on the economic growth momentum and GDP target, as supportive real estate and infrastructure policies suggest. The evolving Chinese steel market scenario post Golden Week holidays will determine the outlook on Indian steelmaking raw material exports in the near term.