India: Iron ore fines export index drops further on China’s steel production curbs

With the spot iron ore fines index dropping by $13/t today, the Indian iron ore export price has declined further. SteelMint’s weekly export index for low-grade Indian iron ore fines (Fe 57%) decreased by $7/t w-o-w to $69/t FoB east coast India. The index has fallen to an 11-month low, as per data maintained with SteelMint.

The export price has declined amid uncertainty surrounding steel production cuts in China. In conversation with market participants, SteelMint learnt that the export market remained dull this past week with no deals being reported.

Chinese mills are focused on destocking. Margins have taken a backseat for now and the excess inventory is a pressing concern. Several mills have been heard liquidating inventory even while incurring losses.

“Iron ore fines Fe 57% export indications are at around $92-95/t CFR China. However, considering the higher cost, it is not viable for Indian sellers to conclude export deals,” shared a trader.

“The Indian iron ore exports market is dull due to the current trend of falling futures and sliding global iron ore prices. We have not heard of any deal from India in the last one week. Also, we expect the prices to shrink even more going forward,” an Odisha-based mining company executive said.

Rationale:

• Price indicators- No confirmed deal was reported in the curret publishing window and hence given 0% weightage under T1 trade.
• SteelMint has received nine (9) indicative prices and offers during the current publishing window, and seven (06) were considered for price calculation as T2 inputs, being given a weightage of 100%.

Market highlights:

• Spot iron ore prices fall by around $25 w-o-w: Spot iron ore fines Fe 62% prices fell to $170.05/t, CFR China as against $195/t a week ago. The prices dropped sharply by around $13/t d-o-d as against 183.15/t CFR China yesterday. Prices declined as procurement activities slowed down amidst a bearish market outlook shrouded by worries over revision in production control measures.
• Rising iron ore stocks at Chinese ports:Iron ore inventory at major Chinese ports decreased to 128.25 mn t last week as against 129.5 mn t in the previous week, as per data maintained by SteelHome.
  
• DCE iron ore futures continue downtrend: DCE iron ore futures for Jan’22 contract plunged as much as 5.6% to RMB 999/t ($154.54/t).
• Freight rates stable w-o-w: Freight rates for 50,000-55,000 t export vessels from east coast India (Paradip) to China remained stable at $27/t w-o-w. However, 21-28 days’ quarantine and demurrage charges remain matters of pressing concern adding to costs.