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China’s Iron Ore Imports Expected to Hit Record High This Year

Via AGMetalminer.com

If iron ore is in the news, can China be far behind? Contrary to earlier predictions, China may end up importing a record consignment of iron ore this year. With the global iron ore price fluctuating, this could have widespread ramifications.

A recent Reuters report quoted market analysts as saying that China's ore imports this year may touch an all-time high. According to some estimates, imports, much of them from Australia, Brazil, Ukraine, and India, will go up by between 15 and 50 million tons from last year's 1.18 billion tons. The optimistic forecast stems from the fact that in the four months of 2024, China has already purchased 411.82 million tons of iron ore, which is over 7% more than the same period last year.

China's Iron Ore Boom: Growth Engine or Misfiring Signal?

So, what do high iron ore imports signify for China? Does it signal that its economy has started showing new offshoots of growth? China observers say infrastructure is definitely showing an upward trend, as is manufacturing. However, the property market continues to be depressed.

That could also be why Chinese crude steel consumption has still not picked up. Steel output fell by 1.9% in Q1. According to a report quoting Eduardo Mello Franco, marketing manager for pricing at Brazilian mining company Vale, there remains strong resilience in the near term. However, the property market will likely slow down even further in the coming years.

Correlations With the Iron Ore Price

On Monday, China's finance ministry announced the start of the much-anticipated sale of long-term special treasury bonds. Beijing aims for these bonds to bolster key sectors of its sluggish economy.

That same day, the prices of iron ore futures surged, driven by these reports of increased bond issuance by Chinese authorities. This positive news helped overshadow the effects of lower-than-anticipated credit data from the leading consumer market. Indeed, the most-traded September iron ore contract on China's Dalian Commodity Exchange got over some early losses to end the day's trading 2.42% higher, at about U.S. $123 (888 yuan) a metric ton.

Breaking Down the Sudden Demand for Indian Ore

There seems to be a new-found love for low-grade ore from India, especially among the Chinese. In fact, India set a new record for the export of iron ore in 2023. Now comes news that about 92% of iron ore exports from India for the 11 months of FY24, amounting to about 40 million tons, went directly to China.

According to data compiled by market analytics firm BigMint, the Indian iron ore market experienced a significant surge in the export of iron ore fines and lump for FY24, reaching a three-year peak of 36.5 MT. This represents a remarkable increase of approximately 145% compared to the estimated 15 MT shipped in FY23. According to this report, exports of iron ore pellets also witnessed substantial growth, rising by nearly 80% year-on-year to 11.3 MT in FY24, up from 6.3 MT in FY23.

The moneycontrol.com report states that several factors contributed to China's renewed interest in Indian iron ore fines. Among them was the vigorous restocking activity before the Chinese New Year. Additionally, the steep cost of buying high-grade iron ore from alternative sources, coupled with the slim profit margins of Chinese mills, played a significant role in making the Chinese steel mills flock to low-grade Indian ore. This makes sense. As China looks to increase its imports, the iron ore price will continue to be a big factor.

Indian Iron Ore Price Too Tempting for China

India has both high-grade and low-grade ores. That said, the latter is typically more impure and has a lower percentage of iron compared to high-grade ores. However, what makes it most attractive for China's steel mills is the low cost.

One more factor that seems to have worked in favor of Indian ore is the removal of the 50% export duty on iron ore, the 45% duty on pellets, and the 15% levy on finished steel products, which occurred about two years ago. The same news report states that once these limitations were gone, exports from India began growing.

By Sohrab Darabshaw via Metalminer.com

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