22-11-2022 Braemar Dry Bulk Research Update
India rolls back steel and coal duties
Indian authorities have reversed several duties for steel-related commodities introduced back in May, now that prices have eased. A 15% export duty levied on eight steel intermediate products, a 50% export duty on iron ore and concentrates, and a 45% export duty on pellets have been removed. Meanwhile, import duties of 2.5% on anthracite, coking coal, and ferro-nickel, and 5% on coke and semi coke that were removed in May have been brought back.
Indian steel exports (excl. scrap) have dropped off this year following a surge in exports in 2021. In the first ten months of 2022, exports totaled 3.8 MMT, down 62.6% YoY. October saw only three shipments totaling 93,000 tonnes discharging in Vietnam, Saudi Arabia, and Italy, the lowest monthly volume since 2015. This is partly due to the export duties, but also a result of weaker global steel demand due to slowing economic activity. Strong domestic demand has also discouraged exports, with India the only major steel producer to realize growth in both production and demand so far in 2022. According to Worldsteel, demand is forecast to grow by 6.1% in 2022 and 6.7% in 2023, while output has increased by 6.1% YoY from January-October.
The removal of iron ore duties will benefit producers of low-grade iron ore that is not typically utilized in the country’s domestic steelmaking industry. Following the introduction of the levy in May, iron ore exports fell 82.3% YoY from June-October. Prior to the duties, China was India’s largest iron ore buyer, thus we do not expect a sharp revival in this trade as the Chinese steel industry remains weak. According to Worldsteel, Chinese crude steel production totaled 860 MMT in the first 10 months of 2022, a decrease of 2.2% YoY. Production did increase by 11% YoY in October, albeit from a low base.
Colombia’s coal exports improve in November but fresh blockades threaten rail links to ports
Colombian coal exports have picked up in November, and are on track to total 5.1 MMT for the month, an increase of 4.6% YoY. However, ongoing rail blockades out of mines, which started two weeks ago are threatening coal exports from the country. Earlier roadblocks resulted in Colombia’s coal exports falling by 10.5% YoY and 22% MoM to 4.3 MMT in October. Exports in November, however, have improved as the previous situation has eased and volumes have made it to port, with loadings amounting to 170k tonnes per day, 21% higher than the average in October. Given the time taken from mine-to-port however, the fresh blockades could drive a similar effect on exports if the situation continues unresolved. Colombian miners have sought to take advantage of tight global supplies in 2022, increasing seaborne exports by 6.4% YoY from January-October. Turkey has been a major market for this coal, importing 1 MMT in October, an increase of 88% YoY. While Europe has been a significant buyer of Colombian coal in the latter half of the year, the blockades saw exports to Europe decline by 43% YoY to 900k tonnes in October, recovering to 1.6 MMT so far in November.