Falling Iron Pellet prices in Indian domestic market stall on exports viability
Pellet manufacturers based in the eastern part of India find some relief as falling prices in domestic market find support on recent export deals which has been concluded by the large manufacturers.
On the 22nd of July, Fe 63 Pellet prices had touched an all time low of Rs 6,100 per tonne in Barbil (Odisha).
Offers bounced back to Rs 6,200-6,250 per tonne (loaded) levels in the previous week.
Most of the Pellet manufactures based in the eastern region are eyeing for international buyers, owing to higher realization and improved margins on depreciating Rupee at 60-61 levels against US dollar.
Some relief to Pellet makers in Bellary (Karnataka)
Pellet makers located in the southern part of India were quite disturbed looking at downward trend of Pellet prices in Odisha.
They also find some relief as offers in Bellary (Karnataka) are unexpected to fall further.
As more of export deals are anticipated to be finalized in the eastern region in the days ahead, demand (high) supply (low) gap in Pellet might widen.
Manufacturers in Bellary would be at an advantage and raise offers on improved demand from domestic buyers.
Cost of exporting Pellets
The current cost borne on transportation of Pellets by truck to Paradip port, is around Rs 1,800-1,900 per tonne.
Considering domestic Pellet prices at Rs 6,100 per tonne, landed cost to port is about Rs 8,000 per tonne.
Other handling and stevedoring charges stand at Rs 250 per tonne.
Now, the FoB cost comes to US$137.5 against the selling price standing in the range of $138-140 per tonne for Fe 63.5 Pellets (considering 1 USD = 60 INR). The above value shows that exports market is a better option rather than sales in domestic market.
Domestic Pellet prices should sustain at current levels
Indian Rupee is expected to remain weak over wide CAD (Current Account Deficit).
Indian Pellet manufacturers will continue to enjoy benefits over rising Dollar and chances are quite less that domestic Pellet prices will drop further.
For more details, contact
Seema Goenka
(seema@steelmint.com)
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