China cuts and Covid-19 limit Brazil iron ore exports

Published date: 15 October 2021

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Steel output cuts in China and disruptions to industry caused by Covid-19 cases and parts shortages weighed on Brazil's iron ore exports in September.

September exports fell by 10.1pc on a yearly basis and 3.1pc on a monthly basis to 33.68mn t, while third-quarter exports fell by 2.7pc year on year to 100mn t, as significant steel output cuts in China were partly offset by the recovery of global steel demand from the impact of the Covid-19 pandemic in the rest of the world.

Third-quarter exports to China fell by 11.6pc compared with 2020 to 71.1mn t, as mills followed instructions to cut production.

Shipments to Malaysia rose by 8.5pc to 4.75mn t, and shipments to Bahrain more than doubled to 3.3mn t. Exports to Japan rose by 36.4pc to 4.24mn t. Shipments to the EU rebounded by 58.2pc to 5.6mn t.

But the third-quarter recovery softened in September, as steel demand in some regions was affected by disruptions in the auto industry, and others by rising Covid-19 cases.

September shipments to China rose by 6.94pc on a monthly basis to 25.58mn t despite the steel cuts, as buyers restocked in preparation for the Golden Week holiday on 1-7 October. But shipments to other destinations fell significantly compared with August. A late August-early September spike in Covid-19 cases in Malaysia, along with weak construction demand in the country, cut exports in half to 926,864t. Shipments to Japan fell by 32.1pc month on month to 1.04mn t in September, after rising Covid-19 cases and auto component shortages hampered the nation's steel output in August.

Shipments to Bahrain and Oman fell by 55.1pc and 29.3pc on a monthly basis to 699,451t and 679,855t, respectively, despite seasonal bans on outdoor construction work being lifted. By contrast, shipments to the EU ticked upwards compared with August by 1.09pc to 1.86mn t, as most steelmakers maintained a high output rate, with steel prices still at a historically high level despite a softening in recent weeks.

Brazil's exports are unlikely to rise in the near term. Major Brazilian producer Vale reduced its end-2022 capacity estimate by 30mn t/yr in September amid a softening demand outlook, led by China's steel cuts. Chinese steel output has since fallen to its lowest since April 2020, and Beijing has announced further production cuts in November-March.

By Brendan Kjellberg-Motton