Export Tariffs of Indian Mines were Raised and How will the Domestic Construction Steel Prices React

SHANGHAI, May 23 (SMM) - According to the Ministry of Finance of India, the Indian government raised the export tariffs of its iron ore on May 22, among which the export tariffs of different grades and varieties were raised to 45%-50%.

Affected by the Russian-Ukrainian geopolitical conflict, the current global inflation gradually increased. In order to curb the high inflationary pressure in the country and ensure the stable operation of its domestic steel industry, the Indian government officially issued relevant policies on May 22 to raise its iron ore export tariffs.

Although India's iron ore exports only account for 2%-3% of the global iron ore trade, China’s imports of pellets from India account for 30% of the total imports. In terms of fines, the imports were mainly dominated by under-58%-grade fines. This round of tariff adjustment will lead to a certain amount of pellet premiums in the short term and the significant decrease of pellets imports from India. In this case, Indian pellets with low price as the main competitiveness had more disadvantages than domestic pellets amid the low profit of steel mills. In the future, China's steel enterprises may turn their procurement direction to China. 

At present, the ore and coke prices are expected to fall. Therefore, the increase in tariffs on Indian mines may slightly slow down the downward speed of Chinese raw material prices, which has little impact on the overall trend.

Recently, the finished product prices remained low. Some BF steel mills in north China were affected by the pandemic, hence the supply slightly tightened. In addition, the current EAF steel mills suffered serious losses. As a result, the output of finished products decreased significantly last week.

In the follow-up, the downward pressure on the finished product prices mainly comes from two aspects. Firstly, the key pandemic areas did not completely unblocked, and there were some small pandemic rebounds in various places, which continuously put pressure on downstream demand. Therefore, some downstream engineering units were cautious and the approval of capital for construction sites was tightened. Although there were national stimulus policies, the overall wait-and-see sentiment was still strong. It will be difficult for the overall demand to rebound significantly without a stronger stimulus policy. Second, although the current profit of steel mills was slowly recovering , the overall prices were still low. In addition, some raw material prices were slowly falling under the pressure of national policies. However, infrastructure and real estate-related stimulus policies had an impact on the overall industrial chain. In this case, some raw material companies had strong resistance to price cuts. Meanwhile, the stability of cross-regional resources circulation and the continuity of production of steel mills declined amid the pandemic control policy. 

The situation of weak supply and demand may continue for a certain period of time without new policies. It is expected that the construction materials prices will remain volatile in the short term, and there may be a slight increase in the beginning of this week.