Among the few things that have saved the nation’s blushes on trade, India’s robust steel and iron-ore exports to China following the Covid-incuded lockdown have surprised most observers.
However, there are now clear signs emerging that the robust pace of shipments may moderate now.
Exports of semi-finished steel and finished steel rose 69% and 28% on year respectively between April and August. More than two-thirds of the steel exported during this period were to China, turning India into a net exporter of steel to the world’s largest producer of the metal for the first time in several years.
However, after a 400% rise in exports in June to China, shipments have come off peak since then, according to Crisil.
Indian exports of iron-ore to China have also seen a robust run in the last six months, a phenomenon not seen in around ten years. India was the third-largest exporter of iron-ore before court-imposed restrictions on mining in the states of Karnataka and Goa toppled the nation from its perch.
Following a court decision to auction off a number of mining leases including in the eastern state of Odisha, previous owners were mandated to clear out piled up ore stocks at the mouths of mine within six months.
Robust run to end?
The recent bounce in iron ore shipments have been mainly from the country’s eastern shores, but the period for clearing the piled up raw material finishes at the end of this month, says Basant Poddar, a miner based out of the southern state of Karnataka.
“Indian iron ore exports are likely to fall beyond September,” he said.
Interestingly, the bounce in Indian iron ore exports came at a time when prices of the raw material zoomed past coking coal for the first time in 25 years.
In fact that was the main driver for Chinese imports of semi-finished steel as it was cheaper to get the material than make it from scratch with iron -ore and coking coal.
Globally too, steel prices were around their lowest in three years during the period at slightly above $400/ton. However, a demand recovery from China has aided a 9% rise in prices in August to $502/ton.
“In the short term demand for intermediate products like semi, sponge iron ore and will continue to be good because they (Chinese mills) are ramping up capacities,” said Mahaveer Shankarlal, analyst with India Ratings.
Demand, however, is likely to moderate in the medium term as the pent up demand created by a lockdown situation in China exhausts itself, he added.
Shankarlal expects Indian domestic demand to also pick up for both steel and iron ore in coming months, which could also cut down the shipments.
China is the first major economy to recover from the Coronavirus, but other nations are expected to follow suit in coming months.