India's 21-day lockdown from today to combat its coronavirus outbreak has forced many of its iron ore exporters to declare force majeure, cutting supplies of lower cost iron ore fines just when Chinese steel mills were turning to them to preserve margins.
"The lockdown of India has pushed up the offers of Indian fines, as there will be no supply temporarily. It may increase the demand of other low-grade fines, but the trend is not obvious right now," a Singapore-based trader said.
Indian suppliers have declared force majeure as a result of port closures, logistical restrictions or a shortage of workers, Chinese buyers said. Other non-mainstream suppliers from South Africa and Malaysia also face closures.
"The closure of overseas mining firms indeed impacts the market," a north China-based trader said. "Low grades like SSF and FBF and medium grades like PBF would be supported in the near term."
Indian fines are usually around 57pc Fe, but can go as low as 54pc Fe and as high as 61-62pc and have higher levels of alumina that requires blending with higher grade ores.
Lower Fe prices rose along with 62-65pc grade prices in China today. SSF prices rose by 10-13 yuan/wet metric tonne (wmt) to Yn525/wmt in Shandong and to Yn528/wmt in Tangshan today.
Chinese steel producers' narrower profit margins this year have already begun a narrowing of differentials for lower Fe ores. BHP narrowed discounts on monthly and second-quarter contracts for JMBF to 8.75pc, MACF to 2pc and Yandi fines to 4pc below 62pc index into China.
"Lower grade iron ore are well favoured by mills to control production costs, which led to the narrower discount for Jimblebar fines and Yandi fines in the second quarter," a north China mill buyer said.
India is also a major supplier of pellet, but European mills' force majeure declarations on steel feedstocks have buyers expecting more high-grade supplies to shift to Asia.
India exported 31.2mn t of iron ore and imported 2.1mn t of iron ore in 2019. Pellet exports rose by 53pc to 12.9mn t, with shipments to China rising by 51pc to 9.8mn t. Total fines and lump exports to China doubled to 15.75mn t in 2019, out of a total 18.35mn t of fines and lump exports.
