India: Advance bookings keep June pellets exports stable; but where are the deals now?

India’s pellet export volumes are expected to be stable at around 1.20-1.30 million tonnes (mn t) in Jun’21 as compared to May’21, SteelMint’s vessel line-up data reveals. Exports in May were at around 1.30 mn t.

But, the key reason for the stable trend is that pellet makers had already booked a good amount in end-Apr-early May’21 for Jun-Jul’21 shipments. Hence, there is not likely to be a drop in pellet export shipments from India in the current month.

Export bookings down

However, iron ore and pellet export bookings have been down in the last two weeks because of the strict Chinese inspection and quarantine period of 21-28 day due to Covid issues.

As a result, no pellet export deal could be sealed, SteelMint has learnt. “In the last two weeks, the market has been rather dull. China has been very silent, especially with regard to Indian cargoes,” said a trade source.

Consequently, export offers have also fallen from $230/tonne (t) levels in early Jun’21 to $223/t for Fe64%, FoB east coast on 23 Jun.

Domestic prices see correction

On the domestic front, there has been some correction in pellet prices. The reason can be traced to falling sponge iron prices.

Mills have been piling up long steel inventory and are thus trying to lower their capacity utilisation, especially the induction furnaces. Consequently, they are lowering their consumption of sponge iron. Lower sponge iron consumption, in turn, would lead to lower pellets demand. In a cascading effect, domestic pellet prices have seen a correction.

SteelMint’s bi-weekly domestic pellet index, PELLEX, has fallen by INR 300/tonne (t) on 29 Jun’21 since mid-June. The market continues to remain subdued with domestic deals having dried up too. Raipur producers kept their offers unchanged while those in Bellary dropped their prices further by INR  400/t recently.

Outlook

SteelMint, however, does not see a very sharp correction in domestic pellets prices, going forward, considering the higher prices of iron ore fines in Odisha. Recently, major merchant iron ore producer Essel Mining hiked its fines offers of Fe62% to INR 9,600/t (excluding royalty, DMF and NMET).

Prices as on 8:55 IST, 30th June. d-o-d changes indicated against closing price of 29th June