India's iron ore exports rise to a 3-year high in FY'24 - BigMint data

*Shipments of fines and lumps reach 36.5 mnt

*Export prospects bright from Karnataka, Goa

*Weak China demand, high port stocks major headwinds

Morning Brief: India's exports of iron ore fines and lump hit a three-year high of 36.5 million tonnes (mnt) in FY'24 compared with around 15 mnt in FY'23 - an increase of about 145% y-o-y, as per latest data available with BigMint.

Exports of iron ore pellets, likewise, increased nearly 80% y-o-y to 11.3 mnt in FY'24 as against 6.3 mnt in FY23, data show.

Exports of iron ore of over Fe58% attract a levy of 30%, while there is no such restrictive clause on exports of pellets.

Why iron ore exports drifted up?

*Export duty removal: The lifting of export duty of 50% on iron ore and 45% on pellets, not to forget the 15% levy on finished steel exports in November 2022, proved to be a boon for exports. Exports were unviable in view of the levies imposed; however, a flood of shipments were witnessed the moment duties were rolled back. The Chinese market happened to be the destination for around 90% of total exports, reinforcing the fact that low-grade Indian iron ore demand from China has been more or less constant over the years amid restricted margins of Chinese steel producers.

*Higher iron ore production: India's iron ore production in the just-concluded fiscal year stood at around 280 mnt, an all-time high. Production increased by around 10% y-o-y. In the event of higher domestic iron ore production the availability for exports, too, increased. As more new mines come online, the availability of ore for exports is expected to increase further provided demand in the Chinese market stays consistent.

*Green signal to exports from Karnataka: The country's Supreme Court broke years of stalemate by passing a landmark verdict of allowing open sales and exports of iron ore from Karnataka. BigMint data show that exports from the state's Krishnapatnam port increased significantly in FY'23 to over 3.6 mnt - a hike of 150% y-o-y.

Outlook

Prospects of exports of low-grade iron ore looks dismal in the short term, as the Chinese authorities are mulling a cap on steel production which, if implemented in letter and spirit, could curb China's appetite for seaborne iron ore in general even as demand remains not-too-strong amid weak property sector sentiments. Also, as per data, stocks of iron ore at Chinese ports stood at 142 mnt in early April - up sharply from a level of a little over 120 mnt in January.

Even in the peak construction season, benchmark Fe62% iron ore fines prices have dropped below $100/t CFR China from a level of over $140/t in January this year. Rapidly declining global prices naturally discourages higher exports.

However, on the supply side, developments augur well for exports. The trend of low-grade exports from Karnataka is expected to gain further momentum as more auctioned mines come online. Resumption of iron ore mining in Goa after a lengthy hiatus, and the state's newly-introduced dump handling policy, are likely to provide a fillip to exports, BigMint understands.