India: BigMint pellet export index falls by $4/t w-o-w amid muted trades

• Around $10-15/t disparity between bid-offers
  
  
• Pellet offers fall to over four-months low level
  
  

BigMint's India pellet (Fe 63%, 3% Al) export (FOB east coast) index fell by $4/t to $108/t on 28 February 2024. The index was recorded at over four month low, previously; it was observed in the first half of October 2023. No deals were recorded from the east coast of India in this publishing window. Bids-offers disparity has weighed down the pellet deals from India in the last few days.

The pellet export market remained silent in the last one week amid sluggish market sentiments and lack of inquiries in the seaborne market. The pellet producers are quoting offers around $130-133/t CFR China but following the current market flow, this was not workable in the overseas market.

Rationale:

• No pellet export deal was recorded and thus not taken into consideration. It was given 0% weightage in index calculation Click here for methodology.
  
  
• Ten (10) indicative prices were received, and seven (7) were considered for calculation of the index, and given a 100% weightage.
  
  

A pellet maker said : "We are not receiving firm inquiries from the overseas market for raw pellets. The current market is in wait-and-watch mode with a cautious approach because buyers' bids were not feasible for us, given the current production cost."

As a result, few plants in eastern India are learned to have adjusted production levels in line with the subdued demand in the domestic and overseas markets.

South Indian pellet producer KIOCL has suspended operations at its 3.5 mnt/year pellet plant in Mangalore w.e.f 24 February, 2024 as per the company notification released recently. The suspension was undertaken amid an ongoing downward trend in pellet market condition. As reported earlier, the company resumed its operations on 16 January, 2024 after a temporary shutdown for around 7 days.

On the other hand, the domestic pellet realisation remained INR 650/t ($8/t) higher than exports. Domestic pellet (Fe 63%) prices fell by INR 200/t w-o-w to INR 8,050/t exw ($99/t) in Barbil, eastern India. BigMint's pellet export ex-plant price realisation for Barbil was down by INR 350/t ($4/t)to INR 7,300-7,400/t exw ($88-89/t) this week.

Chinese sources said that portside offers in China for Indian pellets (Fe 63.5%) have declined by around RMB 35/t ($5/t) w-o-w on 28 February. Offers were recorded at around RMB 1,035/t at ($144/t) Qingdao inclusive of all import taxes and port charges.

China's domestic steel markets remained weak, with players concerned about the revival of steel demand.

A market observer from China commented: "China's iron ore and pellet demand is expected to increase in the near term due to the reopening of construction sites after the Lunar New Year holiday, as well as increased steel use during warmer spring weather. However, poor finished steel sales and lower utilisation rate of blast furnace kept the imported material under pressure."

India's pellet export shipments stood at 174,600 t in the fourth week of February compared to 463,450t in the third week of February, as per vessel line-up data maintained with BiglMint.

Market highlights:

• Global iron ore prices fall w-o-w: The benchmark Fe62% fines index sharply decreased by $4/t d-o-d to $118/t CFR China on 27 February. Iron ore prices fell due to low steel mill margins, sluggish blast furnace production recovery, and subdued demand. As per report, despite the decline in iron ore prices after the holidays, steel mills continued to struggle with poor profit margins.
  
  
• DCE iron ore futures stable w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for May 2024 contract inched down by RMB 4/t ($1/t) to RMB 889/t ($124/t) on 28 February compared to last week. On a d-o-d basis, prices decreased by RMB 8.5 ($1/t) as against RMB 889/t ($123/t) yesterday.
  
  
• Pellet port inventories in China up: Pellet inventories at China's major ports increased by 0.3 mnt to 7.5 mnt on 21 February compared to the last week, according to SteelHome data.
  
  

Outlook:

As per BigMint's analysis, pellet prices in the sea market expected to remain under pressure following the current market dynamics for premium materials in China. However, the steel market sentiments are likely to gradually recover in March, which may support raw material prices as well.