China grabs iron ore from India after government withdraws duty

India’s iron ore exports to China rose 10-fold to $153 million in December from $14.26 million in November after the central government withdrew export duty on steel and iron ore. It accounted for 98% of the total iron ore exports in December. Exports in the category to China during December were also four times that of December 2021.

“Demand has picked up from China, and as China starts opening up after the end of zero Covid-19 policy, demand has picked up. We are yet to see whether this is pent up demand or is going to be a demand. If a similar trend continues in the next two months, it will be a good sign of recovery in China and elsewhere,” said Ajay Sahai, director general of the Federation of Indian Export Organisations.

Home prices in China have been falling for the past six months as rising cases of COVID-19 dampened demand. Reuters reported that home prices in China’s 100 cities fell for a sixth consecutive month in December, falling 0.08% in November after falling 0.06% from a month earlier, according to the China Index Academy, the country’s largest independent real estate index. One of the research firms.

Reuters reported that China has extended support for the industry to address a long-standing liquidity crunch that has strained developers and delayed the completion of many housing projects, reducing buyer confidence Is.

India’s decision to roll back the export duty came amid signs of a slowdown in exports. Overall exports fell 12% in December due to a decline in exports of engineering goods, gems and jewellery, cotton yarn and man-made yarn as rising interest rates and fears of a global recession hit demand.

In an effort to contain rising commodity prices, the government imposed a 15% export duty on a range of finished steel products and increased the export duty on iron ore fines and lumps of 58% and above from 30% to 50% in May 2022. gave. ,

Meanwhile, total exports to China between April and December declined to $11.03 billion as against $17 billion in the comparable period in 2021.

While the export slowdown was largely broad-based, engineering exports are set to decline sharply from $4.59 billion to $1.98 billion in 2021, commerce ministry data showed. China’s trade deficit with New Delhi reached a record high of $87 billion last year.

According to a report by Morgan Stanley, the combination of an extended COVID-Zero policy and a possible slowdown in developed markets could result in a more than 300 basis point drop in 2023 growth in China, the world’s second largest economy.

China’s slowdown is significant as it is one of India’s largest trading partners.

“China has already declined significantly as a contributor to global growth last year and this year, while the US, India and Indonesia, among others, have grown in importance. In fact, China contributed less than 20% to global nominal GDP growth in each of the last five quarters and even fell below 10% in 2Q22,” Morgan Stanley said in a report.