SteelMint: Indian pellet market turns quiet post-export duty levy

India’s pellet export market has turned silent after the announcement of the steep export duty. The Indian government has recently imposed a steep 45% export duty on iron ore pellets from none previously with the objective to control inflation and soaring steel prices and to ensure higher availability for the domestic industry. Market sources are of the view that the announcement of prohibitively steep export duties on steelmaking raw materials signal the government’s intent to curb exports, facilitate higher domestic supplies and control prices.

There are presently no firm offers from Indian players as they have adopted a ‘wait & watch’ approach.

Considering a tentative price idea of $155/t CFR China for Fe 63% pellets, the ex-plant realization will stand around INR 4,300-4,400/t, after the imposition of the export duty, according to SteelMint analysis. On the other hand, SteelMint’s domestic price assessment for the Barbil region stood at INR 9,250/t loaded to wagon. Thus, the realization in exports is much lower than in domestic.

Market highlights

• Global iron ore price inch up w-o-w: The benchmark Fe 62% fines index inched up by $0.35/t w-o-w on 24 May to $130.50/t CFR China. Seaborne iron ore prices rose at the start of the week as mortgage rates in China decreased, boosting the demand outlook. Later, it fell as market participants assessed the news of India’s recent increase in export duties on certain iron ores and concentrates.
• DCE iron ore futures increase w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for September contract closed on 25 May, 2022 (at 3 pm) at RMB 852/t, increasing RMB 61/t ($9/t) as against RMB 791/t on 18 May, 2022. On a daily basis, prices increased by around RMB 21.5/t ($3/t).
• Port inventories in China increase w-o-w: Pellet inventory at China’s major ports increased to 4.9 mnt this week against 4.65 mnt a week ago.

In FY2022, the country’s pellet exports fell to 11 mnt from over 13 mnt in the previous fiscal. With export volumes likely to drop in FY2023, the share of merchant pellet production (estimated at around 30-33mnt) is likely to come down by 10-15% y-o-y.