India: Pellet export index drops $8/t w-o-w on bid-offer imbalance

SteelMint’s pellet export index (Fe 64%, 3% Al, FoB east coast) declined $8/t w-o-w and currently stands at $148/t. The index has fallen to a level which is the lowest in over eight months, as per SteelMint data. Price disparities in offers from Indian players and bids/indications from traders continue to keep the market quiet.

Indicative prices for standard grade pellets from India were heard at around $175-185/t CFR China, while bids from a few traders were heard at around $140/t CFR levels, SteelMint understands.

“The Indian pellet exports market has come to a grinding halt at the moment. Additionally, the fear of the Chinese government imposing export tax on steel products has further reduced sales,” a trader source shared with SteelMint.

“There are no bids and offers at the moment. Also, we have heard that market participants are willing to take cargoes from the port on better domestic realisations,” another trader pointed out.

“The minimum export offer for Indian pellet will be around $180-185 CFR China. However, we are focussing on domestic sales at the moment,” highlighted an eastern India-based pellet producer.

As per data maintained with SteelMint, Jul’21 saw the first y-o-y decline in China’s crude steel production, which was slightly higher than the level seen in the same period in 2019, indicating that steel producers have significantly reduced their capacity under the pressure of production cuts. In Jul, crude steel output was 86.79 million tonnes (mn t), a y-o-y decrease of 8.4%. Hence, decreasing steel output has kept demand for raw materials depressed.

Rationale:

• No deals were heard to have been concluded in the current publishing window. Hence, the weightage given was 0%.
• Six (06) indicative offers and bids were received, out of which two were considered for calculation of the index and given a weightage of 100%.
  

Market highlights

• Spot iron ore prices fall w-o-w: The spot price of iron ore (benchmark Fe 62% fines) dropped w-o-w by around $7/t to $159.5/t CFR China on 17 Aug’21. Prices fell by $3/t d-o-d. Premiums of mainstream medium-grade iron ore fines continued to fall on lower demand. Market participants believe that demand will remain weak in the near term amidst prevailing bearish sentiments.
• Pellet inventory slightly down w-o-w: Total pellet inventory at China’s major ports was recorded at 3.6 mn t as against 3.8 mn t a week ago.
  
• Domestic pellet prices inch down: Central India-based steelmaker Godawari Power and Ispat Ltd (GPIL) has lowered pellet offers for the domestic market, sources informed SteelMint. Current offers have decreased by INR 500/t to INR 14,000/t exw. Decline in pellet export realisations and a drop in offers from nearby markets such as Raigarh and Jharsuguda have weakened Raipur pellet offers, it is believed.