KOLKATA (miningweekly.com) – Tightening of supplies of iron-ore from global resource majors has triggered a spike in outward shipments of the steelmaking raw material through Indian ports and also put low grade fines back in favour with global steel mills.

According to data sourced from the Indian Ports Association, outward bound iron-ore traffic, including pellets, was up 15.33% during April to June, compared with the corresponding period in the previous financial year, at 12.188-million tons.

More significantly, aggregating traders based in the eastern state of Odisha point out that tightening global supplies of iron-ore in the wake of the tailings dam breach at Vale’s Brazilian mines, cyclone impact in Australia and global resource majors’ inability to ramp up production to ensure higher shipments to steel mills, have led to low grade Indian iron-ore fines (iron content 58%, but lower than 62%) of high alumina content finding large volume takers, particularly among Chinese steel mills facing higher grade raw material supply issues.

The traders said that generally low grade, high alumina content iron-ore fines do not find large volume overseas buyers and as a result most local miners carry large pithead stocks estimated to have mounted to levels of around 150-million tons early this year, with 80% of this stock in just the two states of Odisha and Jharkhand. But following the squeeze in global supplies and a rally in international prices, such stockpiles of low grade, high alumina content fines have fallen by about 30% over the past two months with both aggregating traders and miner-exporters successfully booking large volume contracts with traders representing Chinese steel mills.

The change in buying habits among global steel mills is being attributed to two prime reasons by the local market. Firstly, Chinese steel mills so far have predominantly bought high-grade Brazilian and Australian fines to feed their blast furnaces, but the Chinese government imposing stricter pollution control measures, entailing additional capital expenditure by the steel mills, and lower availability of Australian and Brazilian fines, at higher landed prices, has prompted these steel mills to increasingly look at low grade iron-ore fines, at lower prices, to maintain per unit costs of production and sustain margin realizations from finished steel sales, local traders said.

Secondly, the price rally in international iron-ore prices has increased the attraction for low-grade Indian fines. Traders said that the landed price of Dalian iron-ore has surged 49% since early this year, largely driven by supply side worries. Local traders said that while high grade Indian iron-ore fines (iron content 62.3% and above) has consolidated above the $100/t mark at levels of around $115/t CFR China, Indian offers for low grade ore too were inching closer to $100/t, currently ranging between $85/t and $90/t CFR China.

So much so that even State-run trading firm, MMTC Limited, has decided to enter into exports of low grade fines. It has called for empanelment of local miners to aggregate low grade fines volumes for export through the eastern Indian ports of Paradip, Vishkhapatnam, Haldia and Gopalpur.

The price rally in iron-ore prices is offering additional margin realizations as the export tax on iron-ore fines with iron content below 58% is nil against a tax of 30% in the case of lumps and fines of higher iron content.