Indian iron ore export shipments, including pellets, in the first six months (first half or H1) of Jan-Jun’21 touched around 31 million tonnes (mn t) compared to a little over 25 mn t seen in the same six months of CY’20, an increase of 24%.
But pellets exports dropped a marginal 3% in H1 to 7.24 mn against 7.48 mn t in H1’20.
Total exports of iron ore have been averaging over 5 mn t per month so far.
Why have exports risen in H1?
First, in the aftermath of the mines auctions, the old lessees were given time till seven months of the expiry of their mines to liquidate their material. These miners had gone on an overdrive to produce more too since they were aware they may not be retaining their mines after the auctions were over.
Secondly, prices also rose during H1. Prices were volatile throughout H1 but also showed an upward trajectory every now and then, hitting a peak of around $230/tonne (t) in May’21. Rates have been above $150/t throughout the better part of H1 and above $200/t in Jun’21. Such a trajectory has allowed Indian miners to rake in good margins, goading them to export heavily.
Thirdly, production cuts in China were not so severe during H1, which supported high global prices.
China highest importer
China was, of course, the highest importer of Indian iron ore in H1’21 at 22.57 mn t.
Japan followed with 6.55 lakh tonnes (0.74 mn t in H1CY’20) and South Korea with 2.20 lakh tonnes (1.44 lakh tonnes in H1CY’20). However, exports to these two geographies also took a hit because the Indian government withdrew the special export sop offered to NMDC for its long-term contracts from Mar’21.
Outlook
SteelMint’s estimate is, total iron ore exports volume in full CY’21 would be 50-55 mn t. With around 31 mn t already exported, the balance 20-25 mn t are expected to be covered in H2. If exports were averaging over 5 mn t per month in H1, these are expected to drop to 3.5- 4 mn t per month in H2.
The reason behind the lower exports in H2 is China’s crude steel production cuts, which will inevitably lower its appetite for iron ore, especially the lower grades which form the bulk of exports from India.
With the production cuts, China is likely to focus on higher grades or pellets, which will keep India’s pellets exports firm in H2 but demand for the lower grades may soften.
As a consequence, iron ore export prices may not be that supportive, going forward. “They may not crash but be range-bound within $150-200/t, and that upper band may not sustain for long period,” forecasted a source.
Prices as on 9:00 IST, 20 Jul. d-o-d changes indicated against closing price of 19 July
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