A few iron ore import bookings into India were heard lately, whipping up speculation as to whether more such deals could be in the offing. These deals have surfaced after a gap of around eight months with last import parcels seen in Jan’21, at 0.14 million tonnes (mn t) and at 64,000 tonnes in Dec’20. Iron ore imports have been erratic and nil in most months as tracked from Jan’20.
Recent import deals
SteelMint learnt from reliable sources that two vessels of Kumba South African iron ore of Fe 64.5%, have been booked, both by southern India-based companies. One vessel is of 55,000 tonnes while the other is of around 35,000 tonnes. Prices for both deals are hovering at $113-114/t CIF Krishnapatnam.
Why the sudden Indian interest in imports?
The reason for the sudden Indian interest in imported ore lies in the fact that global prices of this key steel-making raw material have crashed of late. The benchmark Fe62% Australian fines price, after touching dizzying heights of more than $230/tonne (t) around the third week of May’21, had been volatile with a pronounced upward trend. However, it started falling off the cliff from Jul’21 to eventually grovel at a low of less than $95/t. Indeed, the spot benchmark price fell by $6.8/t to $94/t CFR China on 20 Sept’21.
Lacklustre demand from China due to its production cuts and increased supply have pulled down ore prices to below the $100-mark for the first time in 14 months. Market participants expect iron ore prices to fall further amid weak fundamentals.
Parity between imported, domestic prices
Consequently, the falling prices have found parity with Indian domestic iron ore prices.
Landed cost of imported iron ore into India stands around INR 9,000/t. Domestic prices are hovering around INR 6,700-7,000/t and that of pellets are at INR 12,400/t
No appetite for fines from larger mills
Since the larger primary mills have their own mines, they are is less likely to import fines. Mills are adhering to its mine development plan, would have to lift fines ore from its own captive mines. Other mills, being landlocked, it will not make sense to import even at these crashed price levels. Consequently, there have not been any indications of import bookings by the larger mills.
Outlook
Going ahead, if further deals do happen, these will expectedly be in lumps and from the sponge iron mills, because of two reasons. First, imported ore is of higher Fe content and therefore sponge players will require lesser coal to reduce the iron. The prices of coal having skyrocketed, these units can cut down on their fuel cost. Secondly, high quality domestic ore will not be easily available in large quantities at current prices.
“We can expect some quantities of lumps getting booked in the near future if import prices fall further,” a source said.
Larger lump import bookings, in turn, will pressure domestic lump and pellet prices.
NMDC, in its last price revision, dropped lumps (6-40 mm, Fe65%) prices by INR 1,000/t m-o-m to INR 6150/t.
SteelMint’s bi-weekly domestic pellet (Fe 63%) index, PELLEX, has fallen by around INR 1,000/t m-o-m to INR 11,100/t DAP Raipur on 21 Sep’21. Bellary iron ore pellet (Fe 63%) prices dropped to INR 11,300/t against INR 12,000/t a month back.
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