MUMBAI: The deadlock in iron ore price negotiations in China and the monsoon rains hit India’s iron ore exports hard.
According to a study, a slump in demand from Chinese steel producers and the rains hit shipments badly and the country’s iron ore exports slumped by 45% to 5.6 million tonne in June over the previous month.
The country’s iron ore exports in June was flat in comparison to the same month last year.
In the April-June quarter, iron ore exports stood around 26 million tonne, the same as the corresponding quarter the previous year.
Chinese steel makers were negotiating with global iron ore majors on pricing of ore in June. Due to this Indian exports were hit as steel companies in China postponed purchases hoping to see steep price cuts from ore suppliers.
Heavy rains also added to the woes of exporters, particularly in Goa, as it adversely impacted supplies to the major ports. The state alone accounts for around 40% of the country’s total exports.
Chinese steel makers are still negotiating with global suppliers like BHP Billiton and Rio Tinto asking for price cuts of up to 50% on annual long term iron ore contracts.
Meanwhile, iron ore imports into one of China’s main ports are set to slump by up to 50 per cent over the next few months in the wake of events surrounding the Rio Tinto affair.
The severe drop is the first real evidence of the impact of the inability of China’s steelmakers to reach an agreement over the benchmark ore price with the major iron ore producers.
Chinese steel mills have since reduced orders from global miners at annual negotiation price and turned to the rising international spot price for imports, which now stands 7 per cent higher than the price Japanese and South Korean steelmakers settled for in May.
China’s iron ore imports soared 46 per cent from last June, reaching 55.29 million and up 3.4 per cent over May.
As a result, imports into Rizhao Port in Shandong province, China’s largest iron ore port which accounts for a fifth of all deliveries, are set to fall by 40 per cent in August and 50 per cent in September compared to the average level in the first six months of this year.
Chinese steel mills started to reduce orders in May when the China Iron and Steel Association rejected the 33-per cent cut (offered by miners) and held out for more discount.
There is also evidence of the Chinese steelmakers turning their back on Australian imports and switching to Brazilian ore instead.
Source : Commodity Online