Some secondary steelmakers in India have asked the government to ban the export of low-grade iron ore fines to ensure more availability in the subcontinent, amid the preference for the material in key importers such as China for steel production.
The Chhattisgarh Sponge Iron Manufacturers Association recently urged the Indian government to consider a ban on the export of low-grade fines, Anil Nachrani, president of the association, told S&P Global Commodity Insights this week, adding that secondary steelmakers from other parts of the country also plan on making that request.
Fines with iron content lower than 58% is classified as low-grade fines and is mostly exported by India to key destinations such as China, as there are few takers for that variant in the subcontinent.
“It did not make sense for Indians to export raw materials to other countries, while domestic secondary steel manufacturers are left with scarce availability of the raw material ,” Nachrani said.
It would be more feasible for India to focus on exporting value-added finished steel rather than raw materials, as the export of the former would help bring in more revenue to the country, he added.
However, the mining and mineral association — Federation of Indian Mineral Industries — told the government that this demand from the secondary steelmakers was “unsubstantiated” as Indian primary and secondary steelmakers only use 62% Fe and above grades of iron ore for production.
“It will be a mistake if the government goes ahead with the export ban for low-grade iron ore,” FIMI Secretary General RK Sharma told S&P Global this week.
There is a stockpile of around 180 million mt of low-grade iron ore at various mines and dumps and any export ban will only add to these stocks, Sharma said, adding that if there was no demand for low-grade iron ore in the country, the point of the export ban was unclear.
A southern India-based pellet producer said such requests to the government have often been seen, and the likelihood of major changes to the policy appeared low currently.
An eastern India-based producer also said that any major change to the existing policy was unlikely, mostly because of the upcoming general elections in India.
China monitoring situation
China-based producers preferred low-grade and medium-grade fines in the seaborne market over premium quality products such as high-grade fines, mainly because of the stress on profit margins seen over the past few sessions on account of sluggish sales of steel, sources said.
The 58% Fe iron ore price is expected to remain steady at $104/dmt CFR China in 2024, while the 65% Fe iron ore price average is expected to ease to $130/dmt from $132/dmt in 2023, according to analysts at S&P Global Commodity Insights.
Chinese iron ore market participants were largely unfazed by the proposal to ban the export of low-grade fines from India, as seaborne supply fundamentals are unlikely to be impacted by that in the near term.
“We are still seeing Indian fines tenders on the market, so [we] doubt there is any implication now,” a China-based iron ore trader said.
Although the Chinese market is aware of the proposal, the feasibility of the actual implementation is another topic, several China-based mill and trader sources said.
“The Chinese market will keep a lookout until the proposal is actually imposed, as so far we don’t yet hear any concrete plans being laid out. Until then, there should not be much impact [on seaborne low-grade fines supply],” another China-based iron ore trader said.
Prices under pressure
Sources seeking a ban on the export of low-grade fines said several secondary producers in the country were facing the double whammy of softening steel prices in the domestic market and higher input costs because of rising prices of iron ore fines.
Secondary producers in India have a larger share in the production of rebar than their primary counterparts.
Tepid Chinese steel mill margins are likely to support seaborne procurements of low-grade fines by buyers who have the option to seek feedstocks from other countries, sources said.
Market sources surveyed by S&P Global in recent days indicated that the tradeable level for March delivery cargoes of 57% Fe Indian fines was at a discount of 13%-14% to the March average of IODEX, on a delivered China basis. Steel demand in China has taken a hit due to sluggish economic growth amid the slowdown in the property sector.
Platts assessed the profit margin for hot-rolled coil producers in China at minus $38.44/mt on Feb. 28, sharply down from minus $12.66/mt during the same time last year, while the margin for rebar manufacturers was at minus $43.05/mt Feb. 28, down from minus $2.47/mt last year, S&P Global data showed.
A few participants said imposing a ban on exports may result in prices of the raw material getting inflated in the seaborne market, providing an advantage to other exporters across the globe as Indian producers will lose out on the opportunity to export the material, of which there is no domestic demand.
Platts assessed HRC at Rupees 54,000/mt for 2.5-10 mm thick material on an ex-work Mumbai basis Feb. 28, down from Rupees 60,000/mt a year earlier, and rebar at Rupees 46,200/mt for 12-25 mm diameter-sized material Feb. 28, down from Rupees 53,300/mt a year ago, S&P Global data showed.
