India’s pellet export prices continued to drop for yet another week in the absence of trade. SteelMint’s pellet export index (Fe 64%, 3% Al, FoB east coast) recorded a drop of around $13/t w-o-w and currently stands at $183/t. The index has fallen to a nearly four-month low, as per SteelMint data.
Market sources shared that demand remains weak as Indian cargoes don’t seem to find favour from Chinese mills amid quarantine issues.
A trader said that indicative prices are at around $210/t CFR China. “However, bids aren’t anywhere close to these levels,” he informed.
“We have started offering pellets actively in the domestic market as there are hardly any bids from overseas buyers. The market has been silent for the last one month,” said a pellet producer from eastern India.
South India-based state-owned pellet producer, KIOCL, has issued an export tender for Fe 63% (2% Al) pellets, as per SteelMint reports. The tender, due on 3 Aug’21, is solely for KIOCL’s empanelled customers. The minimum quantity offered is 55,000 t. KIOCL operates a 3.5 mn t/year pellet plant in Mangalore, Karnataka.
The strong pressure from the Chinese government to reduce steel output in 2021 could result in steel mills’ production decreasing in Aug’21. To reduce crude steel output, Chinese mills will be lowering the Fe level of the blending mix that goes into blast furnaces and to reduce the Fe level, usage of premium products, especially iron ore lumps and pellet, is likely to fall, highlighted a trader source.
China will shift its focus to cutting down actual output, a major difference from the past few years when the core task was to eliminate excess and obsolete steel capacities, Wu Xianfeng , an official from the Ministry of Ecology and Environment (MEE), said on the occasion of the China Iron and Steel Association’s (CISA) interim meeting in Shanghai on 29 Jul.
For the remainder of the year, crude steel output curbs is expected to be more stringent in regions with serious air pollution and for those mills that have scored low in environmental protection efforts.
Rationale:
- No deal was heard in the publishing window. Hence, the weightage given stands at 0%.
- Eight (08) indicative offers and bids were received, out of which seven were considered for calculation of the index and given a weightage of 100%.
Market highlights
- Spot iron ore prices fall sharply w-o-w: The spot price of iron ore (benchmark Fe 62% fines) dropped sharply w-o-w by $17.10/t to $184.15/t CFR China as against 201.25/t last week. However, the prices inched up by $0.75/t d-o-d on 03 Aug’21 as buying interest improved slightly with stability in premiums of mainstream iron ore fines. The derivatives market in China also remained supported, with the most-traded Sept’21 iron ore futures contract on the Dalian Commodity Exchange (DCE) closing slightly higher by RMB 8.5/t d-o-d.
- Pellet inventory down w-o-w: Total pellet inventory at major Chinese ports dropped to 3.9 mn t as against 4 mn t last week.
- Domestic pellet prices down: SteelMint’s bi-weekly domestic pellet index, PELLEX, decreased by INR 350/t to INR 14,400/t DAP Raipur on 03 Aug’21. Decline in iron ore prices in the domestic market has resulted in price correction.
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