India: Weak demand from China weighs on low-grade iron ore export prices

SteelMint’s weekly export index for low-grade Indian iron ore fines (Fe 57%) decreased slightly by $1/t, w-o-w, to $38/t FOB east coast India.

China’s preference for low-grade iron ore fines is on the lower side due to the country’s power rationing policies and the drive to lower energy consumption.

This is expected to limit the capacity of steel mills that are required not to exceed the crude steel production volume recorded in 2020. Hence mills are targeting higher Fe content in their iron ore blend.

The production restrictions during the heating season and increased power restrictions in a few Chinese provinces weighed on premiums of medium-grade fines.

It is expected that combining high- and low-grade fines over using medium grade fines is a cost-effective means for production.

“The Indian iron ore export offers should be at around over $50/t, CFR China. However, there is no demand from Chinese buyers and the export price levels are very low for Indian suppliers”, shared a trader.

As per data maintained with SteelMint, total iron ore exports from Indian ports for the week (14 Oct-16 Oct) were recorded at 62,096 t as against zero in the past week.

No deal for low-grade ore was heard this week. However, a deal for high-grade ore (Fe 63%) was heard to have been concluded at $110/t, CFR China last weekend.

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 and offers during the current publishing window, and three (3) were considered for price calculation as T2 inputs, given weightage of 100%.

Market highlights:

• DCE iron ore futures falls: DCE iron ore futures Jan’22 contract closed at RMB 650.5/t ($101.36), down RMG 59.5/t.
• Spot iron ore prices down w-o-w: The spot price of benchmark iron ore Fe 62% fines decreased by $8.5/t, w-o-w, on 21 Oct to $117.5/t CFR China as against $126/t, CFR China a week ago.
• Iron ore stocks rise at Chinese ports rise: Iron ore inventory at major Chinese ports increased to 139.7 million tonnes (mn t) last week as against 133.7 mn t a week ago, as per data maintained by SteelHome.