China lifted iron ore pellet imports by 79% y-o-y in the January-June period to 21.41mn t, with all major suppliers shipping more volumes.
China’s steel demand and production was the quickest to recover globally from pandemic-related lockdown. Once restrictions were eased in March, stimulus spending on infrastructure and recovery in real estate and manufacturing sectors lifted steel demand sharply, leading to robust demand and higher prices of iron ore.
India retained its pole position as China’s largest overseas pellet supplier in the first half of 2020, increasing exports by 67% y-o-y to 6.87mn t. The cfr China pellet price for Indian-origin pellet had hovered in the $100-125/t range through the year.
Brazil also increased pellet exports by 81% to 2.04mn t in 1H’20. In 2019, Brazil’s pellet exports had sharply increased in the second half of the year to reach 5.22mn t. Whether such an acceleration in pace of exports take place this year remains to be seen. Brazilian mining company Vale is China’s largest mainstream pellet supplier but over the last five years, closure of Samarco mines and suspension of some pelletizing units after the Brumadinho dam disaster in 2018 has squeezed supplies.
The steepest increase in volumes, at 307% and 311% on-year, was reported for Ukraine and Russian cargoes at 4.57mn t and 2.57mn t respectively. While both countries are regular suppliers of pellet to China, sharp erosion of demand in Europe and the Middle East led to diversion of additional cargoes to China.
Volatile market
Imported pellet prices have been volatile through the year.
The cfr China 64pc pellet (Indian origin) price started 2020 at $113/t, peaked at $124/t by the end of January largely on seasonal factors as China clamped down on sintering and pelletizing in winter months. Prices plunged below $100/t in April and remained flat until May on the effects of lockdown and mills’ reliance on domestic pellet, before recovering to $115.5/t by last week.
The premium for 64pc cfr China pellet (Indian origin) to 62pc cfr China fines has narrowed to less than $8/t this week compared with around $20/t premium in the first week of January. Narrowing premium will typically encourage mills to use more pellet in the furnace burden to save on sintering, coke and electricity costs and boost productivity.
Demand for pellet seasonally picks up in winter months as emissions-related restrictions on pelletizing and sintering are imposed in north China cities. With demand and production of steel products largely seen to be maintaining the current robust pace in the second half of the year, pellet imports into China should remain brisk in H2’20.
Pellet export offer prices of Indian cargoes may pick up if there are disruptions in Odisha’s iron ore supplies, where majority of functional mines that were auctioned earlier this year have yet to start production. Logistical restrictions, such as the current cap on truck trips miners can make to Paradip and Gopalpur ports, may further support prices in the near-term.
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