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China’s purchases of iron ore
from India rocketed to an eight-year high in the first half of 2020,
fueled by supply shocks at major producers and record steel output at
the world’s largest steelmaker.
Shipments of the raw material
from India more than doubled to 20 million tons in the six months
through June from a year earlier, according to China’s customs data. It
was also the highest since the South Asian country shipped out 27.8
million tons in the first half of 2012.
China relies heavily on imported
iron ore to fulfill more than two-thirds of demand, and purchases have
jumped on robust demand from steel mills. The country has long sought to
diversify its sources of iron ore, nearly 65% of which came from
Australia in the first half and 17% from Brazil, to rein in supply risks
and price volatility. That push has become more urgent after supply
disruptions at Brazil’s Vale SA.
Hungry For Ore
China's 1H iron ore shipments
from India were highest since 2012.
While India’s exports are
rising, they were still a small sliver of China’s 547.2 million tons of
total ore imports in the first half. India’s higher exports, including
of steel products, come at a time when the coronavirus pandemic is
pushing the country toward its first annual contraction in more than
four decades, and tensions with China are rising. Prime Minister
Narendra Modi’s government is pushing through measures to cut reliance
on Chinese imports after a border conflict worsened economic ties
between the two nations.
“Indian iron ore exporters are
happy to ship out more volumes given that domestic demand remains quite
weak, allowing them to liquidate their inventories, while prices are
also quite supportive,” according to Priyesh Ruparelia, a vice president
at ICRA Ltd., the Indian unit of Moody’s Investors Service.
Iron ore futures in Singapore
jumped as much as 3% to $108 a ton, following positive comments from Rio
Tinto Group on the robust state of demand in top user China.
The difference between Indian
iron ore prices and import prices in China is about $70 a ton and even
with a 30% export duty on higher grades, Indian exporters will still be
able to make profit on it, Ruparelia said.
Source: Bloomberg |
