Indian pellet export index drops to 1.5 month low on demand-supply mismatch

SteelMint’s weekly pellet export index (FOB east coast India) has dropped sharply by $19/t w-o-w to $175/t just after hitting all-time high $196/t two week’s ago. Prices have hit 1.5 month low as per data maintained with SteelMint. Pellet export prices fell significantly owing to increased number of offers from India post budget announcement. Indian pellet makers were apprehensive of export duty imposition. But, with no changes being announced in budget by Indian govt and dull domestic trades, Indian pellet makers have again turned active in exports.

In addition to it, Samarco, (50-50 joint venture between BHP and Vale) has recommenced iron ore pellet production in Dec ’20. The company expects to produce between 1-2 mn t iron ore pellets in the ongoing fiscal and once ramped up, it expects to achieve the production capacity of 8 mn t pa. Hence, market participants highlighted increased pellet supplies in the global market are turning sentiments bearish.

On the other hand, sluggish Chinese demand ahead of the spring holidays has kept buying interest low. Therefore, buyers are less active in the market and reluctant to buy at the quoted offers.

Few India pellet makers’ conversation with SteelMint revealed that pellet prices dropped sharply owing to the upcoming Chinese holiday at the same time they are very optimistic for prices to increase post Chinese holidays. They believe the market may bounce back once Chinese steel makers resume operations from holidays.

Rationale: No pellet export deal was concluded in this publishing window. Hence, not considered for price calculation as T1 inputs and given a weightage of 0%.

SteelMint has received 11 indicative prices, offers and bids (T2) and all were taken into consideration with an average price of $175/t FOB India and given a weightage of 100%.

• Spot iron ore fines price plunge by $15/t – Spot iron ore fines Fe 62% price fell sharply by $15/t in a week to to $150.1/t CFR China due to sluggish forward buying sentiments with Chinese New Year holidays ahead and drop in futures. Yesterday prices were down by $5.95 d-o-d.
• Pellet inventories at Chinese ports decrease – Pellet inventory at major Chinese ports have decreased last week to 5.7 mn t against 5.9 mn t a week before as per data maintained by SteelHome. On a monthly basis, inventories have come down by 1 mn t against 6.7 mn t a month before.
  
• Domestic pellet prices in eastern India slide upto INR 300/t- Indicative prices from Barbil have dropped in the domestic market. SteelMint’s pellet price assessment from Barbil down by around INR 200-300/t to INR 11,400-11,500/t (loaded to wagon) as against INR 11,800-12,000/t (loaded to wagon) against last week.