India’s iron ore, pellet exports may fall by over 50% in FY23

• Iron ore exports drop 70% in Apr-Oct’22, pellets over 30%
• Exports could drop to 13-14 mnt in FY23 from 27 mnt in FY22
• Outlook for FY24 positive

India’s exports of iron ore and pellets stood at 7.11 million tonnes (mnt) in the first seven months of the ongoing fiscal (April-October FY23). As per SteelMint calculations, exports dropped sharply by over 55% during the period under review from around 19.5 mnt in April-October of 2021.

Now, after the withdrawal of export duties of 50% and 45% on iron ore and pellets, respectively, exports are expected to inch higher in the remainder of this fiscal. However, even after factoring in the possible uptick in exports, combined iron ore and pellet shipments are unlikely to edge higher than 1 mnt per month for the rest of this fiscal. Therefore, total exports in FY23 are likely fall by over 50% compared with FY22, SteelMint assumes.

While iron ore exports in April-October this fiscal dropped sharply by around 70% y-o-y from 12.8 mnt to around 4 mnt, outbound shipments of pellets were recorded at about 2.7 mnt – a decrease of 59% compared with 6.6 mnt in the corresponding period of the last fiscal.

India’s exports of iron ore and pellets stood at over 37 mnt in 2021, with iron ore shipments being recorded at nearly 27 mnt. It should be noted that about 88% of total exports were to China. Given low steel demand amid pandemic-related concerns and the overall macroeconomic downtrend in China, export prospects for the rest of this fiscal are unlikely to be very positive.

Why exports crashed?

The imposition of export duties on steelmaking raw materials in late May this year saw a rapid deceleration in outbound shipments of iron ore and pellets. Data shows that exports began to decline, particularly from June onwards, when they dropped over to 0.31 mnt from 2.70 mnt in May. August saw volumes languishing to 0.41 mnt and September saw nil shipments. However, bulk export shipments were recorded at 0.13 mnt in October.

As per SteelMint analysis, domestic pellet (Fe 63%, 3% Al) offers are at INR 7,800/t ($95/t) loaded on to wagon for Barbil, eastern India, whereas pellet export prices on ex-plant basis for the Barbil region are assessed at INR 6,400-6,500/t. Therefore, domestic realisations are higher than exports at a time when global iron ore prices have remained subdued for quite some time amid Covid restrictions and the property sector crisis in China.

Outlook

Although exports have been predicted to drop over 50% in FY23, SteelMint expects combined iron ore and pellet exports to rise to around 30 mnt in FY24.

This assumption is based on the fact that the domestic iron ore and pellet sectors are witnessing a significant expansion in capacity. India’s pellet-making capacity has touched 120 mnt/year. The leading PSU merchant iron ore miners as well as the captive steel players are augmenting output and, despite the rising trend of domestic crude steel production with each passing year, it may well be expected that surplus material will be available for exports.

Therefore, the outlook for FY24 remains buoyant.