Indian iron ore exporters are confident that China, which has recently slowed purchases of the raw material, will soon exhaust its surplus stocks and return to the market to feed its expanding domestic industry. Beijing's moves to cool its red-hot economy and sharp falls in China's domestic steel product prices have prompted Chinese mills to delay term shipments of iron ore.
Indian exporters, who have been increasingly feeding China's hunger for iron ore in the past couple of years, reckon the buying slowdown is temporary. "We keep hearing the Chinese economy is slowing down but at the end of the day steel production is going up," R.K. Sharma, secretary general of the Federation of Indian Minerals Association, told Reuters.
Chinese crude steel output rose by about 25 percent in the first four months of 2005 to 105.94 million tonnes, despite Beijing's measures to cool the sector.
"The correction will take place. Whether it will happen next month, or August or September, we will have to wait and see," said one official with a state-run trading firm.
Sharma said he expected China's iron ore surplus to be exhausted by September.
High stocks of iron ore have built up at Chinese ports - estimated between 30-40 million tonnes after imports jumped 28 percent to 87.55 million tonnes in January-April.
"We saw the same slowdown last year in April when iron ore sales fell because there was a credit squeeze as the Chinese government had intervened," a leading trader said. "But later, exports picked up as demand continued to grow."
India's iron exports to China, the largest after Australia, jumped 43 percent to 60 million tonnes in the year to March 2005 from 42 million tonnes previously. India exported a total 78 million tonnes of iron ore last year.
Most of India's iron ore exports to China are on a spot or short-term basis, while Australia and Brazil normally sign long-term supply deals.
Some Indian iron ore exporters said Chinese buying had slowed as they wanted to arrest price falls and impose quality restrictions. Hot-rolled and cold-rolled steel prices in China have dropped around 10 percent on average since early April.
"China wants to discipline prices. That's why they are delaying shipments," said an official of a mining firm based in southern India. "They are also imposing a lot of restrictions and checks on quality."
Traders said Indian mining firms and exporters need to align their export offer prices to global benchmark levels in order to maintain their market share in China.
Spot Indian iron ore prices, which are seen as the barometer for China's steel sector, fell to below $70 a tonne, including cost and freight, from about $95 early in April.
Traders said the drop in prices has hit profit margins at Indian firms.