Iron ore imports tumble 90% on inflated prices, slip to 7-year low

Iron ore imports tanked 90 per cent during April-October of this fiscal as steel makers opted for domestic sourcing amid rising international prices. This is the lowest level of imports recorded in the past 7 years, a study by CARE Ratings said.

In the corresponding period of last fiscal, iron ore imports swelled by 172 per cent. However, FY20 has seen a contrarian trend in imports with iron ore prices staying elevated. Steep prices prompted domestic steel makers to buy more domestically available ore and lessen dependence on imported supplies.

In the first 7 months of FY20, iron ore imports stood at 0.9 million tonnes (mt) in volume terms. At 37 per cent, South Africa had the highest share in India's imports, followed by Brazil (33 per cent), Australia (19 per cent) and Iran and Philippines with 6 per cent share apiece.

"In the remaining months of FY20, we expect imports to improve at a moderate pace, supported by softening of global iron ore prices and positive signs of improvement in demand from domestic steel players. Imports by the end of FY20 are expected at about 2 million tonnes – still a de-growth of 85 per cent y-o-y," said Vahishta M Unwalla, Research Analyst at CARE Ratings.

Iron ore exports from the country too, staged a rebound in the current fiscal. From April to November, exports soared 140 per cent. In the corresponding period of the last fiscal, exports declined by 35 per cent. Exports of iron ore are the highest in the past 8 years, according to the CARE Ratings report. China topped iron ore sourcing from India with a staggering 83 per cent share. The country's iron ore was also shipped to Japan, South Korea, Oman, Turkey and others.

Exports of iron ore pellets, an intermediate product in steel manufacturing, spiked by 58 per cent year-on-year (y-o-y) between April and October 2019. Three-fourths of the material was shipped to China. Steel mills in China have shown an enhanced appetite for Indian iron ore pellets with demand surging 72 per cent y-o-y to 5.7 mt in the period under review. Iron ore pellets were exported to Turkey, Korea, Malaysia, Oman and UK as well.

"Exports by the end of FY20 are expected at about 25-28 million tonnes, a growth of 160 per cent y-o-y. Rise in global prices led to the sharp increase in demand for domestically produced ore, along with increased demand from China for Indian pellets," Unwalla added.

International iron ore prices headed north from the beginning of calendar, zooming 58 per cent between January and July before softening from August onwards. Between August and November, prices fell by 30 per cent.

"The Vale dam collapse in Brazil led to the surge in global iron ore prices in the initial 7 months of the year. However, a slow steel demand globally did not help keep the prices upbeat and they gradually declined to reach $85 per tonne in November 2019," the CARE Ratings report noted.