China has emerged the highest buyer of iron ore from India with nearly 24.75 million tonnes (mt) being exported for April-November period (eight months), a 400 per cent year-on-year rise, sources across different Ministries told businessline. This is the highest export to China in absolute terms in over the last three years, and second highest since FY20. 

Iron ore is a key feedstock, with China using the bulk commodity only for steel-making. Incidentally, India competes with China in global markets in finished steel offerings like hot rolled coils.

So far this fiscal, nearly 95 per cent of India’s iron ore shipments have gone to China, data show  while small stocks went to Indonesia, Malaysia and South Korea. 

The country’s steel-makers have raised concerns over rising steel shipments coming in, thereby impacting domestic market dynamics, including prices. India is now a net importer of steel, reversing a three-year record. 

Exports rise 

Over the last five years, exports to China (from India) have gone up sharply. 

From 18.15 mt for 8 months of FY20 or 76 per cent of total shipments, it shot up to 92 per cent of at 35.19 mt in FY21 - the highest in absolute numbers. 

Shipments dropped to 90 per cent-odd at 17.23 mt in FY22 in view of Covid-led restrictions impacting trade and supplies.

Last fiscal, supplies from India were at just 5 mt, but even that accounted at 72 per cent of the total exports of 7 mt, for the period under review, data from consultancy firm BigMint (formerly SteelMint) show. 

Sources said imposition of export duty had dragged down Indian numbers last year, while FY21 was seen as one of the best years in view of high steel demand globally. 

“Iron ore prices continue to be on the higher side this year driven by Chinese demand. And a good rally is being witnessed since August,” a trade source said. 

Buying of the commodity, by China, from Australia and Brazil are also up in high single digits, sources said. 

The China story 

Iron ore prices have defied investors’ expectations and climbed significantly, by almost two-fifths since May, primarily because China - despite global anticipation - has not gone ahead with production cuts in steel-making.  

Market speculation was non-recovery in the property sector and a slowing government infra project pipeline would finally bring down iron ore prices. But that has not happened. 

Prices for the bulk commodity, a crucial ingredient in steel, climbed 30-35 per cent over the past seven months to $130-135 a tonne, Argus and other trade level data show. 

Right now, China faces a situation where it has excess steel stocks (collaborated with high iron ore purchases) that it is exporting / pushing abroad, including in countries like India. A slide in the yuan to the dollar have only helped push steel exports there.