India: BigMint's pellet export index dips by $5/t amid falling global iron ore prices

• Drop in global spot fines, futures w-o-w
  
  
• Bid-offers disparity keeps trade limited
  
  
• Pellet inventories at Chinese ports stable
  
  

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) decreased by $5/t w-o-w to $97/tonne (t) on 17 July 2024. No major trade was witnessed in this week as sellers kept their offers high while bids remained on the lower side. However, today's spot iron ore index has fallen further by $3-4/t following sluggish sentiments in the Chinese market.

Prices of Indian raw pellets in the global market had dropped in the last one week following weak market fundamentals in the Chinese market amid the ongoing third Plenum Session being held over 15-18 July. Buyers remained sidelined and waited for some optimistic market sentiments to emerge through policy reforms in the meeting in the days to come.

A pellet producer remarked, "Pellet export prices remained under pressure as major buyers were not interested in purchasing material amid lower steel demand in China. Some sellers were heard offering at $115-116/t CFR China but bids dropped today amid the downtrend in Chinese market sentiments. We are holding the material and expecting a price correction post-Third Plenum Session in the near term."

Notably, domestic prices are still INR 900-1,000/t ($11-12/t) higher than in exports. Pellet (Fe 63%) prices in Odisha's Barbil fell by INR 50/t ($0.5/t) w-o-w to INR 7,150/t exw ($86/t). However, ex-plant realisation for pellet exports in Barbil have dropped by INR 400-500/t w-o-w and were recorded at INR 6,200/t exw ($75/t).

A China-based source commented, "Demand for Indian pellets has dropped as some mills are taking maintenance shutdowns amid sluggish market dynamics. Steel demand is southward and current Indian pellet prices not viable for steel mills following the lower import margin and stable inventory levels."

Rationale:

• No pellet export deals were recorded in the last one week and were not taken under price calculations. Hence these were accorded 0% weightage in the index calculation Click here for detailed methodology.
  
  
• Ten (10) indicative prices were received and seven (7) were considered for calculation of the index and given a 100% weightage.
  
  

Factors impacting pellet export market

• Iron ore fines index cools down: The benchmark iron ore fines index fell by $3/t to $107/t CFR China on 16 July. Global fines prices fell amid weak fundamentals due to the ongoing Third Plenary Session in China. Some mills were reducing production and opted for maintenance shutdown following lower steel demand. Meanwhile, the drop in the premium for medium-grade fines signalled a lower buying interest in raw materials.
  
  
• DCE futures down w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the September 2024 contract inched down by RMB 8/t ($1/t) w-o-w to RMB 805/t ($112/t) on 17 July. On a d-o-d basis, futures prices decreased by RMB 19/t ($3/t) against RMB 824/t ($115/t) yesterday.
  
  
• Portside pellet prices decrease w-o-w: Chinese sources said that Qingdao portside offers for Indian pellets (Fe 63.5%) decreased by RMB 10/t ($1/t) w-o-w to RMB 965/t ($132/t) on 17 July, inclusive of all import taxes and port charges. Meanwhile, prices fell by RMB 5/t ($1/t) d-o-d.
  
  
• Pellet inventories stable w-o-w: Pellet inventories at China's major ports remained stable at 6.45 mnt on 11 July 2024 compared to last week, according to SteelHome data.
  
  

Outlook

BigMint notes that the seaborne pellet offers are expected to remain volatile in the near term as the next market dynamics will be dependent on the policy reform in China.

A trader said that the prices may decrease more from this level as bearish market sentiments are expected after China's Third Plenum Session. A few more mills may take maintenance shutdown which can drop import demand and impact Indian pellets export in the near term.