India's seaborne iron ore exports shining in 2023 as China return to the fold

Late last year Nov-22, India finally scrapped export taxes on low-grade iron ore and on some intermediate steel products following months of complaints from miners and steel makers about loss of foreign sales opportunities. The move reverses the imposition in May-22 of a 50% tax on exports of iron-ore lumps and fines with less than 58% iron content.

Indian producers of low-grade ore depend largely on foreign markets, because most major domestic steel producers use high-grade iron ore. A reopening China back then, trying to stoke domestic demand scooped up nearly all of India’s iron ore exports in Dec-22.

Out of the foreign markets, China had the outsized influence. According to AXS data, from 2018 to 2022, China’s share of Indian total seaborne iron exports (in mt) stands at circa 82%. For 7M-2023, this stands at 91 %.

That said, volumes shipped in 2023 had just been on par with the 5-year. In addition, China’s (potential) upcoming cuts in crude steel production are expected to throw a new curveball to the equation.

Meantime, according to earlier reports from Reuters, already facing subdued demand from developed nations, India's exports are likely to be hit by the European Union's 20% to 35% tariffs on high-carbon goods like steel, iron ore and cement, the finance ministry said in a report. In April-23, the EU approved the world's first plan to impose a levy on high-carbon goods imports from 2026, aiming to become a net zero emitter of greenhouse gases by 2050, some 20 years earlier than India's target. The aim of the levy is to prevent European industry from being undercut by cheaper goods made in countries with weaker environmental rules and incentivise their trading partners to decarbonise their manufacturing industry.

Reporting of carbon content in exports to the EU would be required beginning Oct. 1, 2023, and the main goods affected would be steel, cement, aluminium, fertilisers, electricity and hydrogen.

According to AXS data, Europe only account for circa <10% of India’s seaborne iron ore, steel, cement exports from 2018 to 2022.

However, it will be worth monitoring as this could possibly meant a “double whammy”, in the form of carbon certificates for both cargo and freight for Europe importers.