Supramax and ultramax bulkers have emerged as the key beneficiaries of China’s pivot towards greater imports of iron ore from India, according to Braemar.
Lower steel mill margins have incentivised the world’s largest steel maker to purchase lower Fe-content ore from the subcontinent.
“In 2023, India overtook South Africa to become the third-largest exporter of iron ore to China after Australia and Brazil,” said Braemar.
“Moreover, at 16.5m tonnes, the first quarter of 2024 was the strongest quarter for Chinese imports of Indian iron ore since 2011.”
With April being a slower month for Chinese imports from India, now confirmed at 2.6m tonnes, and monsoon rains likely to suppress third-quarter volumes, the broker said a “near-term slowdown can be expected”.
However, it said the Chinese import total ex-India of 36.6m tonnes in 2023 could be surpassed this year.
The increased inflows from India will help shave costs for Chinese mills that are maintaining production despite the country’s economic slowdown.
However, some smaller Indian steel makers are pressing for a ban on iron ore exports after the surge in sales to China pushed up local prices, reported Bloomberg.
Indian iron ore exports jumped 170% to 44m tonnes last year — most of which went to China — at a time when domestic demand is rising.
That has prompted the worst-affected sections of the steel industry to seek restrictions to protect their margins.
“We have asked the government to ban exports of all forms of iron ore — otherwise China’s steel industry will run and ours will shut,” Anil Nachrani, president of the Chhattisgarh Sponge Iron Manufacturers Association, told Bloomberg earlier this year.
“India should be an exporter of steel and not iron ore.”
The Indian government has stepped up in the past to safeguard the interests of local producers.
In May 2022, it imposed a 50% export tax on all grades of iron ore to reduce costs and improve supply. The measure was withdrawn six months later.
In the first four months of this year, total iron ore imports into China jumped 27m tonnes, or 7%, to 412m tonnes, echoing the corresponding leap of 30m tonnes from January to April 2023, Braemar said, quoting Chinese customs data.
“At the same time — paradoxically — the country’s crude steel output retreated 3% year on year, with apparent steel demand sliding 6%,” it said.
“This in part demonstrates the large contribution from continuing expansion in net steel exports to production levels. Net exports grew by an additional 7m tonnes or 28% year on year in January-April.
“Crucially, iron ore port stockpiles in China have jumped a massive 30m tonnes from end-2023 to 144.7m tonnes by 24 May, data from SteelHome show.”
