IRON ORE. Indian Iron ore Industry FY18 vs FY17. Apr 2018

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1 IRON ORE INSIGHT Indian Iron ore Industry FY18 vs FY17 Apr 2018

2 Indian Iron ore Industry - FY18 vs FY17 Financial Year 2018 has observed lot of significance events with regards to Indian iron ore and pellet industry. The iron ore production witnessed significant growth in FY18. India's iron ore production is expected to cross 200 MnT compared to 191 MnT in previous fiscal. India's largest iron ore miner NMDC observed increase of 4% Y-o-Y in its iron ore production to 35.5 MnT in FY18 against 34 MnT in FY'17. Iron ore exports from India decreased by 35% amid sinter cuts put by Chinese govt. for iron ore fines and extended monsoons in Goa resulted reduced in fall in export volumes. Iron ore export has recorded at 15.7 MnT in FY'18 against MnT in previous fiscal. On the other hand iron ore imports to India hit 3- year high in FY18. Pellet exports from India has gained momentum in FY18 and increased by 8% in FY'18 and was recorded at 8.96 MnT against 8.26 MnT in FY17. Amid reduced iron ore availability in Odisha with few major merchant mines asked to shut down operations following Supreme Court order on illegal mining, domestic iron ore prices increased. Serajuddin and Essel mining went out of operations owing to inability to submit the penalty amount during deadline of 31st Dec'17. Odisha based merchant miners had raised iron ore prices in Dec'17 expecting supply disruption in near future. Miners had raised iron ore prices upto INR 800/MT in Dec'17 and further by INR 500/MT in Jan'18. NMDC was also raised iron ore prices in later half of Fy18. In second week of Feb'18 major miners in Odisha resume sale with the due permission of Apex court after submitting penalty amount along with interest, instructed by the Apex Court in its later hearing. This resulted in price cut towards the year end. Indian iron ore prices increased sharply in H2 FY18 amid supply constraints Indian Iron ore Produc on, Exports and Imports Produc on Export Import 30 Prices In INR/MT NMDC Chha Baila Fines sgarh Iron Ore Price Trend Baila Lumps Produc on In MnT FY'15 FY'16 FY'17 FY'18 Sources:SteelMint Research Exports and Imports In MnT Apr'17 May'17 Jun'17 Jul'17 Aug'17 Sep'17 Oct'17 Nov'17 Dec'17 Jan'18 Feb'18 Mar'18 26 Apr 18

3 Iron ore production expected to grow by 5% Y-o-Y India iron ore output in FY17 was recorded at 192 MnT. The data analyzed at the time of report, the SteelMint expects that the country's iron ore output to be around 200 MnT in FY18. NMDC iron ore production increased by 4% Y-o-Y to 35.5 MnT in FY18 against MnT in Fy17. According to the statistics released by Ministry of Mines,the Indian iron ore production for increased by about 7% for the duration Apr-Dec'17 to 145. MnT as against MnT for Apr-Oct'16. Indian iron ore exports plunged 35% in FY18 Indian iron ore exports decreased sharply from MnT in FY17 to 15.7 MnT in FY18. Fall in iron ore exports from Goa amid extended monsoons and less demand for a low grade in China resulted in reduced export volumes. Sinter restrictions put by Chinese mills for iron ore fines weighed down lower grade fines prices..yearly average spot iron ore fines prices in China increased marginally by about USD1/MT Y-o-Y in Fy18. Indian Iron Ore Imports Hit 3-Years High in FY'18 India imported has increased sharply by 49% to 8.6 MnT iron ore in FY18 compared to 5.79 MnT in FY17. The decline in iron ore availability due to suspension in mining activities in few major Odisha mines by Apex Court resulted in sharp increase in Indian iron ore imports in last quarter of FY'18. JSW Steel remained the largest importer in FY18 and imported 5.1 MnT iron ore followed by Kamachi Group and others was imported around 0.71 MnT and Jindal SAW at 0.51 MnT. West and few South-India based steel units imported South African lump. JSW Steel imported fines and concentrate mostly from Australia and Brazil in FY'18. Australia accounted for 38% share in Indian iron ore imports in FY18 followed by Brazil and South Africa. Indian Pellet Industry: FY18 vs FY17 Iron ore exports from Goa decreased sharply by 36% from MnT in FY17 to 9.31 MnT in FY18. In FY18, Vedanta remained the largest iron ore exporter at 4.03 MnT followed by MMTC (exports on behalf of NMDC) at 2.56 MnT and Fomento Resources at 2.36 MnT. Odisha based Rungta Mines exported 1.77 MnT iron ore in FY18. China accounted for 77% share in total Indian iron ore exports in FY18 followed by Japan, South Korea, Malaysia, Vietnam and Kenya.

4 Domestic pellet prices in India augmented in 2nd half of FY18 amid increase in iron ore, P-DRI prices and improved pellet trade activities. Later from Feb'18 till the end of FY'18 domestic pellet prices fell due to weak buying sentiments and reduced iron ore prices by the major Odisha merchant miners in the last week of Mar'18. Indian Pellet Exports Surge on Strong Chinese Demand JSPL stood the largest exporter for FY'18 with exports at 1.92 MnT, accounting for 21%share in total pellet exports from India. However, on yearly basis, its exports have come down by 17 %. BRPL stood second highest in the list of exports at 1.70 MnT, followed by KIOCL at 1.59 MnT and Essar Steel 1.25MnT. KIOCL's pellet exports moved up sharply by 73% in FY'18 against 0.92 MnT in FY'17. Essar Steel's pellet imports increased in FY18 Indian pellet imports increased from 0.34 MnT in FY17 to 0.47MnT in FY18. Entire quantity of pellets imported by Essar Steel Steel in FY18. It imported 0.42 MnT pellets from Bahrain and 0.05MnT pellets from Russia. According to the customs data maintained with SteelMint, Indian pellet exports have registered a rise of 8% to 8.96 MnT in FY'18 against 8.26 MnT in FY'17. Post the Samarco disaster, Chinese steel mills shifted to Indian pellet leading to increased exports from India. Higher pellet premium supported Indian pellet export offers. Indian pellet export reference price assessment increased by 21% to USD 97/MT, FoB India in FY'18 against USD 80/MT, FoB in FY'17. Rungta Mines (Jajang) 03

5 (Koira) Odisha based major merchant miners slashed iron ore prices over increased availability. RP Sao and OMDC mines have also got nod from Supreme Court to resume operations. Serajuddin NMDC slashed iron ore prices in mid of Apr'18. Earlier in the beginning of the month, the miner had announced a roll-over NMDC decreased iron ore floor prices for high grade iron ore while around INR /MT th & 21st e-auctions were held on 04 & 05 May'17. E-auction fetched dull response. Bids remained flat at base price Monthly average spot iron ore fines (Fe %) prices were down sharply by 10% M-o-M at USD 69/MT, CFR China in Mar'18 against USD 77/MT, CFR China in Feb'18.. Indian prices in INR/MT, Global prices in USD/MT, CFR China Rungta Mines prices are loaded to wagons & incld Royalty, DMF & NMET, rest Odisha miners prices are ex-mines NMDC (C.G.) prices are FoR, Royalty, DMF, NMET & other taxes extra Karnataka e-auction bid prices are weighted avg & basic Goa e-auction bid prices are basic. 04

6 Mar In Mar'18, Odisha iron ore production recorded increase by 20% to 8.71 MnT as against 7.28 MnT in Feb'18. State recorded an increase of 8% in iron ore dispatches to MnT in FY'18 against MnT in FY' In FY'18, NMDC's iron ore production stood at 35.5 MnT, up by 4.4% Y-o-Y. In FY18, NMDC's iron ore sales have been recorded at MnT, marginally up by 1.3% as compared to sales in FY'17 at 35. MnT. Indian iron ore import increased sharply by 49% to 8.6 MnT in FY'18 against 5.79 MnT in FY'17. JSW Steel continues to remain largest importer at 5.1 MnT in FY'18. Indian iron ore export decreased by 35% in FY'18 to 15.7 MnT against MnT last year in FY'17. Exports from Mormugao port down by 36% in FY'18. Fig in MnT Odisha dispatches fig are excluding cap ve iron ore movement of SAIL, Tata Steel, JSPL and movement for exports Odisha produc on (fines, lump & concentrate) figures includes that of cap ve miners - SAIL, Tata Steel & JSPL Source: Odisha govt., NMDC, Customs, SteelMint Research Mar 18 5,350 5,300 5, ,800 5,500 6, ,100 6,350 6, ,850 7,000 7, ,650 6,400 7, Domestic pellet prices in India uptick Amid Hike in P-DRI Prices Slight decline in spot iron ore prices resulted in limited decline in offers. 05

7 Mar Indian pellet imports increased from 0.34 MnT in FY17 to 0.47MnT in FY18.. Indian pellet exports have registered a rise of 8% to 8.96 MnT in FY'18 against 8.26 MnT in FY'17. JSPL stood the largest exporter for FY'18 with exports at 1.92 MnT % Amid falling iron ore prices and weak steel demand Lump and 2,600 2,600 2,600 2,500 2,700 2,700 Mill scale prices remained mostly stable % pellet premium decreased. Raipur prices are ex-works and Kandla prices are delivered in INR/MT Source: SteelMint Research Dec 17 Mar 18 Dec 17 Nil Nil Nil 38,900 KK Enterprises exported 38,900 MT to Phillipines in Mar' *

8 Indranath Jha (Research Analyst) Monika Bajaj (Associate Research) Dec Nov 17 Dec APR 2018