India’s Pellet Export To China Increases Over 30% In June 2023

China, the world’s largest Steel producer and consumer of raw materials, has witnessed a significant increase in Iron Ore Pellet (Pellet) imports from India in June 2023.

The export numbers indicate that India’s Pellet exports to China reached approximately 4 lakh tons in June 2023, showing a remarkable growth of around 37% compared to the 2.9 lakh tons exported in May 2023.

Reasons Behind Improved Exports To China

The surge in Pellet exports to China can be attributed to several factors. During the months of April and May, both Iron Ore and Pellet prices experienced a steady decline in the Indian as well as the global market. This decline was primarily due to concerns about low Steel consumption in the construction sector, macroeconomic issues in China, and the introduction of a cap on Steel production in 2023. With limited imports in May, Chinese ports witnessed a decline in inventories. To maintain stock levels, mills improved purchases, hoping for no significant drop in prices. This ultimately increased the Pellet export volumes from India.

At the beginning of June, Iron Ore futures recovered to around $107-108/ton as expectations grew that China would introduce additional stimulus measures to support its uneven and fragile economic recovery following the lifting of quarantine restrictions. The rise in Iron Ore prices also influenced Chinese mills to maintain a sufficient stock of raw materials to manage input costs effectively, sources reported to OfBusiness.

Indonesia Emerges As The Second Major Destination

India’s Pellet exports to Indonesia also experienced a significant surge, recording a 46% month-on-month increase with approximately 1.1 lakh tons exported in June 2023.

Total Exports

When compared to the overall exports of Pellets from India, the figures remained stable, standing at around 5.1 lakh tons in June, similar to the exports in May 2023.

Whereas, from January to June (H1 CY23), India exported nearly 46 lakh tons of Pellets, out of which approximately 38 lakh tons were shipped to China, accounting for around 83% of the total share.

Since China is the major buyer of Indian Pellets, any changes in trends directly impact the Indian Pellet market. It is worth noting that the Indian Pellet industry has been negatively affected during April and May due to the lack of Steel demand in China.

Will China Improve Its Raw Material Sourcing?

China’s Iron Ore inventories are expected to rise in the second half of 2023 due to a slowdown in the steel industry caused by weak demand in the real estate sector.

In June, approximately 94 million tons of Iron Ore were loaded onto the global market for shipment to China, with Australia’s shipment share 64-65 million tons. Analysts expect that Iron Ore and Pellet supplies from India will also increase this year. While India only delivered 1.3 million tons to China in 2022, volumes have already exceeded 20 million tons since the beginning of this year for Iron Ore, Pellets/Concentrates.

OFB’s Insight

India’s Pellet exports to China experienced a significant increase of over 30% in June 2023, driven by lower prices and the anticipation of economic stimulus. Concurrently, Pellet exports to Indonesia also rose, showcasing India’s expanding global market presence. Monitoring market trends and diversifying export destinations will be crucial for sustained growth in the Indian Pellet industry.