Many analysts pointed out that the Indian tariff increase on steel and mineral products has limited impact on the China market. But from the global market, this policy may have a certain impact on market psychology. Under the background that geopolitical conflicts have not subsided, many countries with good resource endowments have begun to strengthen their own resource supply and restrict exports, which will make the commodity market face more variables this year.
India adjusts tariffs on steel and mineral products
On May 22nd, the Indian government raised the export tariffs on domestic iron ore and some steel products, and adjusted the import tariffs on some steel-related products.
Specifically, the Indian government will levy an export tariff of 45% on pellets (an iron ore product), 50% on all fine ores and lump ores, and 15% on steel and semi-finished steel products such as pig iron, hot-rolled coils and cold-rolled coils, and at the same time cancel the original import tariff of metallurgical coke, coking coal and ferroalloy ranging from 2.5% to 5%.
Previously, the Indian government implemented a zero-tariff policy on the export of pellet products, and only imposed a 30% export tariff on iron ore with a grade of more than 58%, and implemented a zero-tariff policy on semi-finished steel products such as pig iron and hot-rolled coils.
India is one of the largest producers and suppliers of steel products in the world, and also one of the important iron ore producers in the world. According to the data provided by Lange Steel, since 20 17, the domestic iron ore production in India has basically remained between 200 million and 250 million tons, and the annual output in 2002/kloc-0 has reached a high level in the past decade, reaching 246 million tons, a year-on-year increase of 20%.
In terms of exports, the proportion of Indian iron ore exports has basically remained between 10% and 15% in the past five years. Among them, the situation in 2020 is quite special. At that time, India's public health problems were serious, which led to a sharp drop in crude steel consumption. Therefore, while the output of iron ore decreased, the export volume reached a new high in recent years, and 202 1 returned to the normal level again.
Previously, India was one of the main sources of iron ore imported by China. From 2003 to 2007, China imported more than one-fifth of the total iron ore from India, and reached nearly one-quarter in 2005, once exceeding the import from Brazil.
However, since 2007, in order to develop the domestic steel industry, India has adjusted its steel export tariffs many times, and the amount of resources imported by China from India began to decline. In 20 12, China imported 4.45% of Indian iron ore, which remained between 1%-5% for a long time, and even lower than 1% in 20 14 and 20 15 years.
From 20 19 to 202 1, China imported 23.85 million tons, 44.67 million tons and 33.42 million tons of Indian iron ore respectively, accounting for 2.2%, 3.8% and 3.0% of China's total iron ore imports in that year.
According to the data of the General Administration of Customs, in the first four months of this year, China imported 5.36 million tons of Indian iron ore, a year-on-year decrease of 7 1%, and the total proportion fell to1.5%; It is estimated that the total amount of iron ore imported from India in the whole year is about 20 million tons, showing a general downward trend.
Meierya Futures pointed out that due to the great difference in India's fine ore resource indicators, the sintering performance is not ideal, especially after the last round of India's resource imports decreased, most domestic steel mills have eliminated India's fine ore resources from ore blending, so this policy change has little impact on the production and use of ore by domestic steel mills. The market has high expectations for the sustained recovery of India's resource imports this year, but with the implementation of India's tariff policy, market expectations have also failed.
The impact on the China market is limited.
According to the analysis of many institutions, the import of Indian iron ore products accounts for a relatively small proportion in the total import of China, and the impact of policy changes on the China market is relatively limited.
This tariff adjustment in India will mainly have some impact on the import of 58% fine ore and Indian pellets, and the impact on pellets is greater than that on fine ore. My iron and steel network predicts that the reduction of Indian pellet production in China market may be obvious, and some traders have decided not to perform pellet contracts after June.
In terms of fine ore below 58%, my steel network predicts that the cost of low-quality iron ore products in India will increase, and the sales profit in the Indian mining market will decrease, but some enterprises still have profits. When the market has digested the expectation of this policy, there is still the motivation for export sales in the medium and long term. More than 58% of Indian fine ore was previously subject to a tariff of about 30%, so the total amount of fine ore coming to China is relatively limited, and the expected impact is relatively limited.
According to the analysis of Lange Steel Network, since September last year, the domestic imports of Indian iron ore have obviously decreased. Even if the imports are stopped in a short time, the impact on China's iron ore supply has been greatly weakened, or even has no obvious impact.
In terms of pellets, Lange Steel pointed out that recently, steel mills suffered losses and pellet consumption decreased significantly. In addition, with the gradual increase of domestic mine output, domestic pellets will make up for the reduction in production to some extent in the short term. In terms of steel exports, Indian pig iron is basically not exported, and billet shipments have also declined since April.
Lange Steel pointed out that from a pragmatic point of view, India's short-term policy changes may affect other low-grade iron ore markets and drive the price difference between high-grade and low-grade ore products to continue to narrow.
Xi He Zhong, an analyst in the Iron Ore Division of Shanghai Steel Union, also told the reporter of 2 1 Century Business Herald that the new Indian iron ore policy has a certain impact on the supply of China market in the short term, but the impact is limited.
At present, in the stage of continuous destocking of iron ore ports, the reduction of India will inevitably lead to a certain degree of supply shortage, mainly concentrated in low-grade and pellets, thus forming a certain support for ore prices. On the other hand, the shipments of mainstream mines such as Australia and Brazil are about to enter the peak period, which is enough to make up for the decrease in India.
Green Dahua Futures Research Report pointed out that in the context of high global inflation, India's tariff adjustment may have a certain impact on market psychology, but the market price will return to fundamental factors in the later period. At present, the rhythm of mine delivery is well controlled, and the port arrival volume is low; However, the resumption of production of domestic steel mills has led to a gradual increase in daily consumption, and the domestic iron ore supply and demand pattern is relatively good. Under the expectation of policy management, it is expected to maintain a wide fluctuation pattern.
Xi He Zhong said that iron ore prices are expected to fluctuate in the near future. In the medium and long term, with the recovery of mining capacity in Australia and Brazil, the reduction of crude steel production in China will lead to an oversupply of iron ore, and the iron ore price center will move down, which is expected to gradually fall below 100 USD/ton by the end of the year.
Meierya Futures pointed out that from the perspective of the global market, many countries with good resource endowments are increasing their supply capacity and the export of resource products is increasing, which will make the international trade of bulk commodities encounter more variables.