SteelMint: India's iron ore export index drops further on weak buying interest

SteelMint's weekly export index for low-grade Indian iron ore fines (Fe 57%) dropped by $2/t to $28/t FOB east coast India. Although the benchmark Fe 62% fines index has witnessed some recovery, demand for low-grade ore has remained subdued.

The spot price of benchmark iron ore Fe62% fines increased marginally w-o-w on rising steel margins on 15 Dec'21 to $109.7/t CFR China as against $107/t a week ago. DCE iron ore futures' May'22 contract closed at RMB 673/t ($105.68/t), up RMB 24/t d-o-d.

Rationale:

• Price indicators: No confirmed deal was reported in the current publishing window and hence given 0% weightage under T1 trade.
  
  
• SteelMint received six (6) indicative prices, bids and offers during the current publishing window, and four (4) were considered for price calculation as T2 inputs, given weightage of 100%.
  
  

Market participants expect better downstream steel demand, due to the Chinese government's support for the real estate sector.

Iron ore port inventories continued to rise and some potential buyers were reluctant to purchase due to the potential price downside and the steep negative import margins. Iron ore inventory at major Chinese ports increased to 156 mn t last week as against 155.4 mn t a week before, as per data maintained by SteelHome.

Trade sources highlighted an increase in freight and quarantine charges for exports to China. Total charges have increased to $20-21/t, up by $2/t w-o-w, which is again turning into a concern for Indian exporters given the lower export prices.

As per SteelMint data, total iron ore exports from Indian ports for the week (28-4 Dec'21) continue to remain nil for the third consecutive week.

On the domestic price front, JSW Steel had scheduled an auction for 300,200 t of iron ore fines (Fe 54-56%) on 13 Dec'21. The total quantity put to auction received bids at INR 510/t ex-mines, including royalty, DMF and NMET. The ore was from the company's Jajang mine in Odisha's Keonjhar district. The floor price for the auction was set at INR 300/t ex-mines. Notably, the material is not meant for exports.