Indian Pellet Prices remain flat over Low Cost Imports

Indian Pellet manufacturers maintain offers as price rise is being controlled by low cost import of Iron ore and turn down in Pellet Sponge prices by upto INR 300/MT in last 1-week.

Despite high Iron ore prices being quoted by the domestic miners and shortfall of Iron ore/Pellets, any increase in prices of Pellets shall not be absorbed by Sponge iron plants. Thus, prices continue to peg at previous level and capacity utilization has fallen to only 30-35%, being dictated by Iron ore availability.

JSPL is using Pellets for captive purpose and BRPL, having beneficiation facilities and Iron ore stockpile, is actively offering Pellets. Tata Steel’s Pellet purchases from domestic market, which was nil in Sep’14, has increased to 0.1 MnT last month.

In the 1st half of FY15, Odisha’s Iron ore production has fallen by 21% Y-o-Y to 22.12 MnT. In addition, Iron ore and Pellet prices increased by INR 1,000/MT (USD 16/MT) and INR 1,600/MT (USD 26/MT).

Cheaper import of Iron ore lump hits sales of Pellet manufacturers, who are supplying their material to Gujarat based buyers. Bhilwara’s (Rajasthan) Jindal Saw is looking into the deliveries of previous bookings. While, Essar Steel has quoted at INR 7,700/MT ex-plant Paradip but buyers are not interested to procure the material at these rates. The company is selling Vizag produced Pellets at INR 8,050/MT delivered or INR 7,600/MT ex-plant and is catering to the needs to port based Sponge iron plants.

Pellet consumers in Raipur (Chhattisgarh) are fulfilling their Iron ore requirement through NMDC owing to continuing shortfall and expensive Iron ore being offered by only a few Odisha based miners. Landed cost of sized ore is cheaper by INR 700-800/MT in comparison to procurement from Odisha based miners. Not all the Raipur based Pellet makers are open to receive orders because of maintenance reason or in house consumption.

Karnataka Pellet producers maintain prices as Iron ore prices in e-auctions have shown no uptrend and P-DRI prices have fallen by INR 300/MT. Although, Iron ore availability is adequate via e-auctions, sales have recorded a constant fall of 36% each month since Aug’14 as the leading purchaser JSW Steel has shifted to low cost imports.

Indian Iron Pellet Prices

Basic prices
*Prices as per loaded into wagon
Source: SteelMint Research

As far as Pellet imports are concerned, sources mentioned there is scarcity of Pellets from Ukraine and that may not be available for the next 2-3 months. Though, prices are yet to be fixed, about 140,000 MT Canadian Pellets (Fe 64%) are being offered to Indian importers. Australia’s Grange Resources is also offering Pellets at nearly USD 120/MT CFR India.

Apart from high prices for imported Pellets in contrast to imported lump and inadequate Pellet quantity from some of the international suppliers, the biggest concerns that have restricted Pellet imports to India are requirement in small quantities by steelmakers, which would push up freight rates.

“At least 80,000-100,000 MT Pellets has to be imported at a time, but this isn’t matching to the requirement of steel plants as they are looking for lesser quantities. Once, the total need of importers comes up to a sufficient quantity, we shall place orders. For instance, if 40,000 MT is imported at Chennai port from Australia, freight charges rise to around USD 28/MT, which would be nearly USD 19-20/MT for about 80,000 MT,” said traders.