- Pellets imports were last seen in FY’21
- Gujarat mills book pellets from Middle East
Gujarat-based steel mills have ramped up iron ore pellet imports, securing approximately 230,000 tonnes from the MENA region in January, as per data maintained with BigMint. Notably, pellet imports to India have resumed after a long gap of four years, since FY’21.
Market sources indicate that the shift towards imported pellets has been influenced by higher domestic pellet prices and iron ore lumps, which have made imports a more attractive option.
A pellet buyer commented: “Domestic iron ore lump prices are on the higher side, while South African Fe 65% lumps are currently not viable for mills. This has led buyers to explore better-quality alternatives at reduced costs for lower alumina material.”
Factors behind resumption of pellet imports
Price gap between domestic and imported pellets: Domestic pellet (Fe63%) prices in Kandla rose by INR 600/t ($7/t) q-o-q to INR 11,050/t ($126/t) DAP Kandla in Q3FY’25. The recent pellet import deals were concluded at a price range of $118-122/t CNF Kandla, with material grades consisting of Fe 65% and Fe 67% with low alumina (max 1%) content, sources highlighted to BigMint.
Imported lumps prices increase: India’s import offers for South African iron ore lumps (Fe 64%) climbed up by $2/t q-o-q to $112/t CNF Kandla in Q3FY25 amid a rise in global fines and lump premium prices.
Increase in sponge production: In CY’24, demand for sponge iron witnessed an uptick of 9% to 54 mnt in comparison with 49 mnt in CY’23, reveals BigMint data. Gujarat region mills have around 150,000-t monthly capacity of sponge iron which requires around 230,000 t of raw material per month. Domestic pellets and lumps command slightly higher prices, raising the cost of production for mills.
Quality benefits: The Mena region Fe65% pellets have a maximum 1% alumina and a maximum of 0.13% phosphorus and sulphur.
A trader informed, “Pellets with Fe 65+% and low alumina (max 1%) content are not easily available in the domestic market at these rates. This premium grade at a cheaper price has sparked strong buying interest.” Another market participant, commenting on current market dynamics, said: “Some trading companies have acted as intermediaries in these deals, and the material will be gradually supplied to steel manufacturers in the region.” On the other hand, domestic pellets are of grade Fe 62.5-63%.
Outlook
With high domestic lump prices and limited availability of premium-grade pellets, Gujarat-based steel mills are increasingly turning to cost-effective, high-grade imported pellets. The influx of more cargo in February is expected to further shape the market dynamics, reinforcing the reliance on international suppliers for raw material needs.
Looking ahead, market participants expect additional shipments in February 2025, mainly from the MENA region. Sources said that some deals with South American suppliers have been finalised, and deliveries are expected by the end of February. However, the transacted parties have yet to confirm these shipments.
Meanwhile, eastern coast steel plants in India are actively engaged in pellet export deals, which have resulted in higher domestic pellet prices. This has further encouraged western region steel mills to rely on imported pellets coming from the east coast rather than domestic raw materials.
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