India: Iron ore fines export index slips on adverse sentiments in China

Demand for low-grade iron ore continues to trend lower as a result of steel production cuts in China. SteelMint’s weekly export index for low-grade Indian iron ore fines (Fe 57%) decreased by $3/t w-o-w to $84/t FoB east coast India.

The Chinese govt has been stressing on curbing steel output in H2 CY’21. The country has already produced 563.33 mnt of crude steel, that rose by 12% y-o-y, China’s National Bureau of Statistics data showed.

The way steel mills see it, if certain discounted iron ore brands require more coke in the blast furnace, the overall cost might still be higher compared to using relatively higher-grade iron ore. This is yet another factor which has kept demand for low-grade ore subdued.

Export deals of around 300,000 t of fines (Fe 57%) were recorded by SteelMint in this publishing window. All the deals were concluded by Odisha-based miners and traders. However, an unconfirmed trade for 55,000 t of fines (Fe 57%) was heard concluded at $110/t CFR China.

Rationale:

• Price indicators- Three confirmed deals were reported in this assessment period, out of which two were considered for price calculation and given 50% weightage under T1 trade.
• SteelMint has received eight (8) indicative prices and offers during the current publishing window, and six (06) were considered for price calculation as T2 inputs, being given a weightage of 50%.

Market highlights:

• Rising iron ore stocks at Chinese ports – Iron ore inventory at major Chinese ports increased by around 1.7 mn t to 129 mn t last week compared with 127.3 mn t in the previous week, as per data maintained by SteelHome.

• DCE iron ore futures stable: DCE iron ore futures yesterday remained largely stable with the most-traded Sept contract closing at RMB 1,219.5/t (+5.5).
• Freight rates up slightly w-o-w- Freight rates for 50,000-55,000 t export vessels from east coast India (Paradip) to China increased to $27/t as against $24-25/t last week. However, 21-28 days’ quarantine and demurrage charges remain matters of pressing concern adding to costs.