CHINA’S purchases of iron ore from India rocketed to an eight-year high in the first half of 2020, fueled by supply shocks at major producers and record steel output at the world’s largest steelmaker.

Shipments of the raw material from India more than doubled to 20 million tons in the six months through June from a year earlier, according to China’s customs data. It was also the highest since the South Asian country shipped out 27.8 million tons in the first half of 2012.

China relies heavily on imported iron ore to fulfill more than two-thirds of demand, and purchases have jumped on robust demand from steel mills. The country has long sought to diversify its sources of iron ore, nearly 65 percent of which came from Australia in the first half and 17 percent from Brazil, to rein in supply risks and price volatility. That push has become more urgent after supply disruptions at Brazil’s Vale SA.

While India’s exports are rising, they were still a small sliver of China’s 547.2 million tons of total ore imports in the first half. India’s higher exports, including of steel products, come at a time when the coronavirus pandemic is pushing the country toward its first annual contraction in more than four decades.

“Indian iron ore exporters are happy to ship out more volumes given that domestic demand remains quite weak, allowing them to liquidate their inventories, while prices are also quite supportive,” according to Priyesh Ruparelia, a vice president at ICRA Ltd., the Indian unit of Moody’s Investors Service.

The difference between Indian iron ore prices and import prices in China is about US$70 a ton and even with a 30 percent export duty on higher grades, Indian exporters will still be able to make profit on it, he said.(SD-Agencies)