SteelMint: India’s pellet export index falls on China demand uncertainty

SteelMint’s India pellet (Fe 63%, 3% Al) export index FOB east coast was recorded at $123/t, down $3.5/t w-o-w. Iron ore prices in China have come under pressure as the government has mandated curbs in production to contain air pollution. This, in turn, has created uncertainty about demand in the near term.

Steel mills are looking to reduce sintering operations in the steel hub of Tangshan which has led to weaker iron ore import prices. Further, some mills in China are preferring lumps to pellets owing to cost effectiveness. This has slowed down demand for imported pellets.

India’s pellet export shipments for the second week of February were recorded at 347,750 t in comparison with 380,651 t in the previous week, according to vessel line-up data maintained with SteelMint.

Rationale

• No deal was recorded in this week so far for price calculation under T1 trade and given 0% weightage in index calculation. Click here for methodology.
• Nine (9) indicative offers and bids were received, and six (6) were considered for calculation of the index, given 100% weightage.

Market highlights:

• Export realisations rise: Domestic pellets (Fe 63%, 3% Al) assessement stood at INR 9,800-9,900/t ($118-120/t) loaded on to wagon for Barbil, eastern India. On the other hand, SteelMint’s pellet export prices ex-plant for the Barbil region also increased along with global price hike this week to around INR 8,600/t ($103/t).
• Global iron ore prices decrease: The benchmark Fe 62% fines index decreased by $7.75/t w-o-w on 28 February to $124.1/t CFR China as against $131.85/t a week ago. Iron ore spot prices in China fell w-o-w due to lack of market liquidity and reports of capacity reduction in the domestic market. Market participants expected that demand for seaborne iron ore would fall as a result of the Tangshan municipal government’s request to steel mills to decrease sintering capacity.
• DCE iron ore futures stable w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for May 2023 contract closed on 1 March (at 3 pm) at RMB 908.5/t, down RMB 1/t as against RMB 909.5/t on 22 February. Prices edged up by RMB 20/t ($1/t) d-o-d.
• Port inventories in China rise: Pellet inventory in China’s major ports stood at 6.9 mnt this week as against 6.7 mnt a week ago.