India: Pellet export index drops to 3-month low on bearish sentiments in China

Limited bids from end-users, falling global iron ore prices and steel output cuts in China continue to exert downward pressure on Indian pellet export prices. SteelMint’s pellet export index (Fe 64%, 3% Al, FoB east coast) has recorded a drop of around $21/t w-o-w and currently stands at $196/t. The index has fallen to a nearly three-month low, as per SteelMint data.

Market sources shared that demand being persistently weak, sentiments have turned bearish from end-users.

“There are no firm bids at the moment. However, some bids were heard at around $210-215/t CFR China for standard grade pellets,” highlighted a global trader.

“No pellet export deal from India was reported recently. We were offering at around $240/t CFR levels but bids aren’t anywhere close to these levels. The market is weak and we are trying to assess the market,” said an easternIndia-based pellet player.

The provincial government of Shandong, a coastal province in North China, has sent out a notice last week requiring that the crude steel output of the province should not exceed 76.5 mn t in 2021, SteelMint came to learn from sources in China. COVID cases have registered an increase in a few provinces in China. That apart , demand from other key markets like SE Asia (primarily Vietnam) has also remained subdued due to lockdown restrictions, which seems to have dented demand for Indian pellets.

Rationale:

• No deal was heard in the publishing window. Hence, the weightage given to it stands at 0%.
• Seven (07) indicative offers were received, out of which five were considered for calculation of the index and given a weightage of 100%.

Market highlights

• Spot iron ore prices fall sharply: The spot price of iron ore (benchmark Fe 62% fines) dropped by $2.5/t d-o-d to $200.45/t CFR China as premiums for medium-grade fines fell on the back of subdued demand from Chinese steelmakers. Steel mills in China are choosing to blend low-grade fines due to steel output curbs. The spot prices have dropped against $213.6/t, CNF China assessed a week ago.
• Pellet inventory down w-o-w: Total pellet inventory at major Chinese ports dropped to 4 mn t as against 4.1 mn t last week.

• Domestic pellet prices stable: SteelMint’s bi-weekly domestic pellet index, PELLEX, continues to remain stable at INR 14,700/t DAP Raipur on 27 Jul’21.