- Pellet prices get support in seaborne market
- Buyers prefer lumps over pellets in China
- Chinese economic factors improve
BigMint’s India pellet (Fe 63%, 3% Al) export index (FOB east coast) increased by $2/t w-o-w to $105/t on 24 April, 2024. In the last week, an eastern India-based pellet maker recently concluded an export deal for 75,000 t (Fe62%) of pellets. The deal was concluded recently at around $120-121/t CFR China for May shipment, as per BigMint. Another 55,000 t deal of pellet (Fe63%) from Odisha was heard at $121-122/t CFR China last week but is yet to be confirmed.
South India-based pellet producer floated a tender for exports of 50,000 t of iron ore pellets (Fe 63%, 8% Al2O3+SiO2) in the last week. However, the export tender has failed to fetch successful bids amid low response from buyers.
The Indian pellet prices in the seaborne market remained largely stable in the last one week. A few deals were heard from pellet makers but could not be confirmed by the consumers and sellers. The market activity remained moderate as sellers remained cautious to sell their material in expectation of better prices in the near term.
A few sources said that the domestic Indian pellet prices had witnessed an uptick after some good premium in the OMC auction. Now sellers are eying to sell in both domestic and overseas markets and waiting to sell wherever they receive good margin.
Notably, domestic pellet prices increased by up to INR 500/t in the domestic market amid a rise in iron ore offers and improved steel prices.
Over the past week, the Chinese government announced a $140 billion bond to invest in the steel industry, which helped to stabilise prices. However, this week prices remained stagnant in China due to global conflicts and weather constraints, particularly due to floods in the southern region of China.
On the other hand, Chinese sources said that portside offers of Indian pellets (Fe 63.5%) increased by around RMB 15/t ($2/t) w-o-w on 24 April. Offers were recorded at around RMB 1,020/t at ($141/t) Qingdao, inclusive of all import taxes and port charges. Surprisingly, the offers increased by around RMB 45/t ($6/t) d-o-d today.
Seaborne shipments demand declined as restocking finished for end-May arrival cargoes in preparation for China’s Labour Day holidays starting 28 April. The current lump premium is reasonable in showing better cost-effectiveness compared to a pellet. This has caused a low demand for Indian pellets in the export markets.
Few overseas sources stated that Chinese steelmakers favoured lower grade fines and iron ore lumps over pellets to reduce manufacturing costs as they are getting good margins in steel on lumps material.
Rationale:
- One (1) pellet export deal was recorded and considered for price calculation. It was given 50% weightage in the index calculation Click here for methodology.
- Eight (10) indicative prices were received, and nine (9) were considered for calculation of the index and given a 50% weightage.
Market dynamics
- Iron ore spot prices up w-o-w: The benchmark iron ore fines index increased $4/t w-o-w to $114 /t CFR China on 23 April. Certain steel mills are keeping their stocks at a notably reduced level, resulting in little demand for procurement in the seaborne market for them.
- Pellet export realisation up w-o-w : Domestic realisations are higher by INR 1,150/t ($14/t) compared to exports. In the local markets, pellet (Fe 63%) prices rose by INR 350/t ($4/t) w-o-w to INR 8,350/t exw ($100/t) in Barbil, eastern India. BigMint’s pellet export ex-plant price realisation for Barbil remained stable w-o-w at INR 7,200/t exw ($86/t) this week.
- DCE futures sharply rise d-o-d: Iron ore futures on the Dalian Commodity Exchange (DCE) for the September 2024 contract increased by RMB 18/t ($2/t) w-o-w to RMB 888 ($123/t) on 24 April. The prices sharply rose by RMB 39/t ($5/t) on a d-o-d basis.
- Pellet inventories edge down: Pellet inventories at China’s major ports inched down by 0.3 mnt to 7.3 mnt on 18 April compared to the last week, according to SteelHome data.
Nil pellet export from India
No pellet volumes were exported from India in the third week of April compared to 59,550 t in the second week of April, as per vessel line-up data.
Outlook:
Based on BigMint’s analysis, the pellet export market is expected to remain volatile amid the upcoming Chinese labour holidays. Indian participants predict an increase in prices this May following a trend from previous years.