- Pellet prices continue to fall in the seaborne market
- Domestic realisations better than exports
- China’s finished steel demand under pressure
BigMint’s India pellet (Fe 63%, 3% Al) export index (FOB east coast) inched down by $1/tonne (t) to $92/t on 3 April 2024. The seaborne pellet prices have continued to decline over the past few months amid bearish market sentiments and lack of transactions. Prices fell to four-year low the last time it reached such low levels was recorded in April 2020, as per data maintained with BigMint.
No deals were heard in this publishing window amid a lack of inquiries from buyers and lower bids against offers. The demand for Indian raw pellets was negligible in China and other Southeast Asian countries.
An eastern India-based pellet maker said: “We can’t sell at this level of bids prevailing in the overseas market. The current bids were even less than the domestic offers at the ex-plant prices. So we are just waiting for the improvement in the market rather than selling material at a negative margin. However, few ports-based sellers may sell the material at current prices amid exceeded supply of pellet in the domestic market”.
Domestic pellet realisations are higher by INR 1,250/t ($15/t) compared to exports. In the local markets, pellet (Fe 63%) prices dropped by INR 100/t ($1/t) w-o-w to INR 7,350/t exw ($88/t) in Barbil, eastern India. BigMint’s pellet export ex-plant price realisation for Barbil fell to INR 6,000-6,100/t exw ($72-73/t) this week.
One trader mentioned that only a few plants in the eastern China are still undergoing blast furnace maintenance shutdown due to poor market conditions. The challenges faced by the Chinese steel market are also impacting the iron ore and pellet market, as China is a major importer of Indian raw materials. Despite this, some sellers are optimistic, viewing this as a short-term decline, and anticipate that the market will improve in the coming days, especially if the Chinese government introduces stimulus measures for the iron ore and steel industry.
On the other hand, Chinese sources said that portside offers of Indian pellets (Fe 63.5%) have fallen by around RMB 20/t ($3/t) w-o-w on 27 March. Offers were recorded at around RMB 890/t at ($123/t) Qingdao, inclusive of all import taxes and port charges.
China-based sources highlighted that the high level of port stock and poor domestic demand in the country lowered the export bids. The finished steel demand is very poor and due to this steel mills restocked the material at lower prices as per need basis. The Indian sellers’ offers to sell material in China are not viable for Chinese steel mills amid poor steel margins.
Rationale:
- No pellet export deal was recorded but not considered for price calculation. It was given nil weightage in the index calculation Click here for methodology.
- Ten (10) indicative prices were received, and six (6) were considered for calculation of the index, and given a 100% weightage.
Why are pellet export prices under pressure?
- Iron ore spot prices inch down w-o-w: The benchmark iron ore fines index inched down by $2/t w-o-w to $102/t CFR China on 2 April. Seaborne iron ore prices fell as bearish market sentiment lingered in the iron ore market. As per the report, the steel demand increased on improved demand amid slightly recovered market confidence. Although upcoming Chinese Qing Ming national holiday on 4-6 April kept the market at bay.
- DCE futures fall d-o-d: Iron ore futures on the Dalian Commodity Exchange (DCE) for September 2024 contract d-o-d decreased by RMB 19/t ($2.5/t) to RMB 749 ($103/t) on 3 April.
- Pellet inventories at Chinese ports fall: Pellet inventories at China’s major ports decreased by 0.3 mnt to 7.3 mnt on 28 March compared to the last week, according to SteelHome data.
Nil pellet export shipments from India
There was no pellet shipment exported from India in the last week of March 2024 as per vessel lineup data.
Outlook:
According to BigMint’s analysis, pellet export offers are anticipated to face continued pressure in the upcoming days due to the Chinese Qing Ming holiday and substantial inventory at ports, compounded by a sluggish finished steel market.