Iron ore exports from India are expected to stay low, as the world’s fourth-largest producer saves more of the material for its own use, according to commodity analytics firm Kpler.

“Indian iron ore exports … have really gone off in the last several months. And it is fairly symptomatic of extremely robust domestic consumption,” said Reid I’Anson, Kpler’s senior commodity analyst, adding that this will continue throughout the year.

India’s iron ore exports fell by 90% year on year in October last year, after falling by as much as 96% in September.

India accounts for 9.2% of global iron ore production. The greatest producer is Australia, which accounts for about 35% of global supply, followed by Brazil and China.

“In terms of growth, India will be a standout economy in 2023… And I believe exports from India will stay sluggish as well, given they consume the majority of domestic production.“

A 20% Increase?

The drop in India’s commodities exports comes, as China’s Covid reopening pushes commodity prices surging, and I’Anson predicts an “upward movement of 20%” in iron ore prices.

The benchmark 62%-grade iron ore price last traded at $123.37 per ton, up around 30% since December, when China announced a pullback of its “zero-Covid” restrictions.

Iron ore is generally used to produce steel, which is utilized in construction and engineering projects – and both Asian countries are on course to use more of it.

“You’ve got the comeback of the Chinese consumer, which is going to boost durables demand, and you’re going to see an improvement in the Chinese housing market,” I’Anson said.

According to Refinitiv, China Accounts for Over 60% of Worldwide Iron Ore Exports.

“Downstream demand in China has begun to show some signs of optimism based on government support, notably for the construction sector, which is the country’s largest steel user,” Tamara Thorne, according to a senior analyst at Refinitiv Metals Research.

Demand for its neighbor is projected to be at a similar level.

“We expect steel consumption in India to rise significantly faster than what we saw in the first nine months of the fiscal year (in 2022),” said JSW Steel joint managing director Seshagiri Rao.

How Long Will it Continue?

B K Bhatia, secretary general of the Federation of Indian Mineral Industries, expects that iron ore shipments in 2023 will be significantly higher than those in 2022. India’s iron ore exports were hampered by a 50% tariff on low-grade iron ore exports, which was repealed in late November.

However, while India’s iron ore shipments have increased since December as a result, the shift may not be sustainable, according to Kpler’s I’Anson. He believes that exports will be unlikely to rebound to the levels achieved in 2020 and 2021.

“The amount to which loadings have recently increased is unlikely to be sustainable for long,” he said.

However, India’s iron ore exports would not be the most important contributor to price volatility.

“The ability of Rio Tinto in Australia and Vale in Brazil to function up to the constraints of their supply systems is the most important swing element,” said CLSA research analyst Robert Stein.

Both iron ore powerhouses anticipate flat year-on-year production on the low side, and a 5% growth on the high side.

“Working capital has stabilized but is relatively elevated due to commodity price volatility, higher raw material prices, and global supply chain pressures,” Rio Tinto noted recently in its fourth-quarter production figures.

Another important factor is China.

“Demand is still impacted by the Chinese property deleveraging program, and while optimistic sentiment may contribute to price increases in any given week, [but] to sustainably achieve such levels, we would need to see widespread property stimulus or support,” Stein said.

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