General

On May 21 local time, the Indian government suddenly announced that from May 22, the export tariff of iron ore was officially raised, among which the export tariff of iron ore of different iron grades and varieties was raised to 45%-50%. At the same time, the import tax rate of coking coal and Coke will be reduced to 0.

In addition, Indonesia has also issued an export ban on bulk commodities. Bahlil lahadalia, Minister of investment and chairman of the investment Coordination Committee (BKPM), recently said that the Indonesian government would stop exporting bauxite and tin in 2022.

Some analysts pointed out that the export policy adjustment of India and Indonesia may further aggravate the tight supply of global metallurgical products, and the price rise trend of bulk commodities may continue.

India raises tariffs on steel and mineral products

On May 22, the Indian government raised the export tariff of domestic iron ore and some steel products, and adjusted the import tariff of some steel related products.

Specifically, the Indian government will impose an export tariff of 45% on pellets (a kind of iron ore products), 50% on all fine ores and lump ores, and an additional export tariff of 15% on pig iron, hot rolled coil, cold rolled coil and other steel and semi-finished steel products. At the same time, the original import tariff of 2.5%-5% on metallurgical coke, coking coal and ferroalloy has been cancelled.

Previously, the Indian government implemented a zero tariff policy on the export of pellet products, only imposing a 30% export tariff on iron ore with a grade of more than 58%, and a zero tariff policy on pig iron, hot rolled coil and other steel and semi-finished steel products.

India is one of the major producers and suppliers of steel products in the world and one of the important iron ore producers in the world. According to the data provided by Lange steel, since 2017, India's domestic iron ore output has basically remained between 200million and 250million tons. In 2021, the output reached a high of 246million tons in recent ten years, an increase of 20% year-on-year.

In terms of exports, the proportion of India's iron ore exports has basically remained between 10% - 15% in recent five years. Among them, the situation in 2020 is special. In that year, India's domestic public health problems were serious, resulting in a sharp decline in crude steel consumption. Therefore, while the iron ore output decreased, the export volume reached a new high in recent years, and returned to the normal level again in 2021.

How does it affect the Chinese market

India had previously been one of the main sources of iron ore imports from China. From 2003 to 2007, China's iron ore imports from India accounted for more than one-fifth of the country's total imports, and nearly one-quarter in 2005, once exceeding those from Brazil.

However, since 2007, in order to develop the domestic steel industry, India has adjusted steel export tariffs several times, and China's import of resources from India began to decline. In 2012, China's iron ore imports from India accounted for 4.45% of the total imports. Since then, it has remained between 1% and 5% for a long time, and even less than 1% in 2014 and 2015.

From 2019 to 2021, China imported 23.85 million tons, 44.67 million tons and 33.42 million tons of iron ore from India, 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 iron ore from India, a year-on-year decrease of 71%, and the total proportion fell to 1.5%; It is estimated that the total import of Indian iron ore in the whole year is about 20 million tons, showing an overall downward trend.

Mayer futures pointed out that the sintering performance is not ideal due to the large difference in the indicators of Indian fine ore resources. Especially after the last round of reduction in Indian resource imports, most domestic steel mills have removed Indian fine ore resources from ore blending. Therefore, this policy change has little impact on the production of domestic steel mills. The market has high expectations for the continuous recovery of India's resource imports this year, but with the implementation of India's higher tariff policy, the market expectation has also failed.

Or change the supply-demand balance of global commodities

It is worth noting that India, as an important global supplier of steel products, has suddenly raised the export tariff of relevant products significantly, which may once again change the supply and demand balance of global bulk commodities, with the greater impact concentrated on the export of iron ore and steel products.

In the futures market, since November 2021, the main contracts of iron ore futures have fluctuated upward all the way, rising from the low point of 511.5 yuan / ton to 843 yuan / ton, with a cumulative increase of 64.8%. As India suddenly raises the export tariff of iron ore, it may stimulate the domestic iron ore futures price to continue to rise.

This tariff adjustment will mainly have some impact on the import of 58% fine ore and Indian pellets. The impact on the import of pellets is greater than that of fine ore. The impact of less than 58% fine ore is greater than that of more than 58%. The reduction of Indian pellets to China may be obvious. Meanwhile, some traders have made it clear that they will not perform the pellet contracts after June.

At present, the sales price of domestic pellets is about 1300 yuan / ton (about 176 US dollars / dry ton). If the Indian pellet price increases by 45% with the export tariff, it is expected that the existing steel mills using Indian pellets will consider using domestic pellets.

At the same time, Indonesia has also issued an export ban on bulk commodities. Bahlil lahadalia, Minister of investment and chairman of the investment Coordination Committee of Indonesia, recently said that the Indonesian government will stop exporting bauxite and tin in 2022 to support the upstream and downstream construction of related industries.

According to customs data, in the first quarter of 2022, China's cumulative import of Indonesian bauxite was 6.768 million tons, a year-on-year increase of 118%. According to SMM data, China's import of bauxite from Indonesia accounted for 21.2% of the total in March.

In addition, Indonesia ranks second in the world in terms of tin reserves and output. According to the statistics of the Ministry of energy and mining of Indonesia, the tin ore reserves of the country are 2.23 million tons, and the tin ore reserves are 2.29 billion tons; Indonesia's tin production target in 2021 is 70000 tons.

Some analysts pointed out that the export policy adjustment of India and Indonesia may further aggravate the tight supply of global metallurgical products, and the price rise trend of bulk commodities may continue, which deserves enough attention.