China: Pellets imports drop 50% in CY'21 on steel production curbs

China's pellets imports witnessed a sharp decline of 50% y-o-y during CY'21 to 22.52 million tonnes (mnt) as against 45.04 mnt in the same period last year. Pellets shipments into China declined y-o-y on the considerably higher base of 2020 as well as the bleak steel production scenario in China that unfolded since the beginning of H2CY'21.

India remained the largest iron ore pellets exporter to China, accounting for 6.92 mnt out of 22.52 mnt of total imports during Jan-Dec'21. However, imports from India have fallen significantly against 11.85 mnt in the year-ago period.

Ukraine was the second-largest source of pellet imports for China at 3.87 mnt followed by Australia and Brazil at 2.03 mnt and 1.97 mnt respectively.

China's pellet imports in CY'21 and CY'20

Fig in mn t
Source: SteelMint

Why have imports fallen?

• China's domestic ROM production increased to 958.99 mnt during CY'21 against 867.45 mnt in CY'20.
  
  
• Consumption controls, reduction of greenhouse gas emissions in the steel industry and outright cut in steel output weighed on iron ore and pellets demand in China.
  
  
• Since lumps have better cost performance than pellets, the proportion of lumps usage and short-term lumps demand may increase. Also, demand could continue to get support from winter sintering curbs and higher blast furnace utilization rates in China, market sources said.
  
  
• Lower realizations in exports than in domestic kept Indian pellet-makers on the sidelines. SteelMint's pellet export index (Fe 64%, 3% Al, FoB east coast) fell from $181/t in end-Dec'20 to $134/t by end-Dec'21.
  
  

Outlook

China's pellet imports from India are likely to remain high in January and February this year given the active bookings seen by traders in anticipation of strong demand comeback from Chinese mills after the Lunar New Year holidays and the Winter Olympics.