India's iron ore imports touch 5-year high in CY'23. What lies ahead?

• Price viability of global iron ore lures Indian buyers
  
  
• Lower gangue content in imported ore, logistic issues encourage imports
  
  
• FY'24 imports may cross record levels amid higher crude steel production
  
  

Morning Brief: India's iron ore imports rose to a 5-year high in calendar 2023 (CY'23) to almost 5 million tonnes (mnt), reveals data maintained with SteelMint. Of course, record levels had been touched in 2018, at 15.6 mnt.

On a y-o-y basis, volumes spurted manifold from 1.40 mnt in CY'22.

JSW was the largest importer at 4.5 mnt, followed by AM/NS India at 0.3 mnt.

Australia was the largest supplier to India, at 2.6 mnt, followed by Brazil with 0.9 mnt, and Canada, 0.6 mnt.

Amongst the ports, Jaigarh accounted for the majority of 4.4 mnt of imports, followed by Paradip, at 0.25 mnt.

Factors that pushed up iron ore imports in CY'23

• Buyers benefit from lower global ore prices: Global iron ore fines Fe 62% prices, after rising to over $130/tonne (t) CFR China in March 2023, dropped off to below $100/t in May. And then, these remained stable at $110/t over June-August, before showing an uptrend. This gave Indian buyers an opportunity to take advantage of the fallen prices to stock up.
  
  

On the other hand, Odisha iron ore prices remained on the higher side till June, last year. For instance, average prices of Fe62% fines from Odisha were at INR 5,500/t ($66/t) ex-mines. With a steep INR 3,500-3,800/t logistic costs added, these increased to around INR 9,000-9,300/t ($108-112/t).

As a result, port-based mills found it cost effective to import the ore than procure from Odisha.

• Quality issues of domestic ore: Domestic iron ore has a higher gangue content compared to imported ore. The level of alumina and silica in domestic ore is markedly higher than in the Australian material. Thus, the latter is obviously better suited for sintering purposes and leads to higher efficiency in blast furnaces.
  
  

Moreover, with most merchant miners having hit their EC limits, mining high grade ore became a challenge, impelling mills to look at imports more intently.

• Logistical bottlenecks make imports cost-effective: Over and above the high domestic freight charges, logistical hurdles - such as shortage of rakes - posed a major challenge to mills. Logistical difficulties intensify during the monsoon season, which tilts the balance in favour of imports for some coast-based mills.
  
  

For some mills looking to source iron ore for use at their plants on the west coast of India, evacuating the ore from Odisha and transporting the same via coastal shipping is more cost-intensive than the landed prices of imported ore on the west coast of India.

Outlook

Although import volumes have increased, the quantum is small in India's overall iron ore consumption, with the latter expected to reach 225-230 mnt in financial year 2023-24 (FY'24). Production had hit an all-time high of 282 mnt in CY'23.

Indian iron ore imports are likely to remain on the higher side keeping in mind the country's increased crude steel production targets, tight availability of high-grade ore in Odisha and logistical bottlenecks.