Chinese steel mills have significantly increased buying interest for Indian pellets. Lesser pellet supply from Indian manufacturers since last few weeks and restricted pellet supply from Brazil has further raised inquiries of Indian pellets in China.
According to market sources report to SteelMint, an east India based pellet maker has recently concluded an export deal for Fe 64% grade pellets at around USD 87/MT, CFR China. Another export deal to China is also under negotiations and is also expected to close around USD 87/MT, CFR China.
The pellet export price has increased against the last concluded deal at USD 81.5/MT, CFR China towards the beginning of this month.
Which all factors have pushed up Indian pellet export offers ?
1. Lesser pellet exports from India to China – According to customs data maintained with SteelMint, Indian exported 0.49 MnT pellets in Apr’17 against 0.75 MnT in Mar’17. So far in May’17 (till 24 May’17) Indian pellet exports have recorded at 0.45 MnT out of which share to China is around 78%. Hence it is evident that Indian pellet exports to China has fallen. Lesser availability of Indian pellets in China has also resulted in increased buying interest from Chinese steel mills.
2. Restricted pellet supply from Brazilian Samarco – Pellet exports from Brazil have dropped considerably after Samarco dam disaster in Nov’15. Samarco has an annual pellet production capacity of 30.5 MnT and produced 12.31 MnT pellets in CY15. As per the latest reports, there are little chances of restarting operations by the end of this year.
It is to be noted that Brazil remained the largest pellet exporter to China in CY15 at 11 MnT and with share of 45% followed by Ukraine and Australia.
However this scenario changed in CY16 & Brazil pellet exports declined sharply to 1.8 MnT. India turned out to be the largest pellet exporter to China in CY16 followed by Ukraine and Australia.
3. Rising spot pellet premium – Last week spot pellet premium for Fe 65% grade pellets touched USD 20.8/DMT, CFR China. As per market participants report, spot pellet premium has further ascended by USD 1-1.5/DMT this week.
Another factor that has turned in favour of exporters is reduction in vessel freight. Current vessel freight from India to China is assessed around USD 8-9/MT which was at USD 10/MT a few week’s ago. Thus all above factors have made sentiments optimistic for Indian pellet exporters.
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