China relies heavily on imported iron ore to satisfy more than two-thirds of its production, and imports have leaped on strong demand from steel mills.
Even after trading tensions, China is importing steel from India made the largest purchases in five years – Insiderfolks. China’s imports of iron ore from India soared to an eight-year high in the first half of 2020, fuelled by supply disruptions to global producers and rising steel production at the world’s largest steelmaker.
Shipping of raw materials from India more than doubled to 20 million tonnes in the six months to June of the previous year, according to Chinese customs numbers. That was also the largest since the South Asian nation exported 27.8 million tonnes in the first half of 2012.
China relies heavily on imported iron ore to satisfy more than two-thirds of production, and imports have leapt on strong demand from steel mills.
The nation has long tried to diversify its supplies of iron ore, roughly 65 percent of which came from Australia in the first half and 17 percent from Brazil, to reduce supply risks and market fluctuations.
This become’s more critical after production shortages in Vale SA, Brazil.
Though India’s exports are growing, China’s 547.2 million tonnes of total ore imports in the first half are still thin.
India’s higher exports, including steel goods, are coming at a time when the coronavirus pandemic is driving the world into its first annual recession in more than four decades, and tensions with China are increasing.
Prime Minister Narendra Modi’s government is pushing through measures to reduce dependence on Chinese imports following a border conflict that has exacerbated economic ties between the two nations.
“Indian iron ore exporters are happy to ship more volumes, provided that domestic demand remains relatively small, allowing them to liquidate their inventories, while prices are also very supportive,” said Priyesh Ruparelia, vice president of ICRA Ltd., Indian Moody’s Investors Service.
Iron ore futures in Singapore rose as much as 3% to $108 a tonne, citing optimistic comments from the Rio Tinto Community on the strong state of demand for top consumers in China.
The disparity between Indian iron ore prices and Chinese import prices is about $70 per tonne, and even with a 30% export duty on higher grades, Indian exporters will still be able to make a profit on it, Ruparelia said.
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