India: BigMint's pellet export index down $3/t tracking global iron ore price drop

• Global fines spot, futures prices drop
  
  
• Indian sellers in wait-and-watch mode
  
  
• Domestic market subdued following Holi festival
  
  

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) inched down by $3/tonne (t) to $93/t on 27 March 2024. The seaborne market for Indian material continued to face bearish sentiments as bids dropped further this week amid lack of buying interest. Pellet manufacturers remained in wait-and-watch mode amid sluggish market sentiments for high-grade material in China.

One deal of 55,000 t of Fe63% pellet cargo was recorded from the east coast of India last week at $114/t CFR China for April shipment.

An eastern India-based pellet-maker said: "The seaborne pellet market continued to fall amid lack of enquiries and China's weak finished steel demand. Buyers preferred low-alumina fines but did not seem to show interest in pellets. We are holding offers and also looking for opportunities to sell material in the domestic market."

The Indian pellet market faced challenges as no bulk deals were heard during the Holi festival. Offers remained stable in the central and eastern regions of India, while buyers remained sidelined following the expectation of a drop in prices.

Another trader said: "The bid-offer gap remained wide this week, too. Global iron ore prices also remained lower in the last one week with fluctuation in offers. Chinese steel mills are looking to buy cheap material and pellet was not an option for them amid weak downstream steel demand."

On the other hand, Chinese sources said that portside offers of Indian pellets (Fe 63.5%) have fallen by around RMB 30/t ($4/t) w-o-w on 27 March. Offers were recorded at around RMB 910/t at ($127/t) Qingdao, inclusive of all import taxes and port charges.

Rationale:

• One pellet export deal was recorded but not taken into consideration. It was given nil weightage in the index calculation Click here for methodology.
  
  
• Eleven (11) indicative prices were received, and nine (9) were considered for calculation of the index, and given a 100% weightage.
  
  

Why are pellet export prices under pressure?

• Domestic realisation better than exports: Domestic pellet realisations are higher by INR 1,250/t ($15/t) compared to exports. In the local markets, pellet (Fe 63%) prices remained stable w-o-w at INR 7,450/t exw ($89/t) in Barbil, eastern India. BigMint's pellet export ex-plant price realisation for Barbil fell to INR 6,100-6,200/t exw ($74-75/t) this week.
  
  
• Iron ore spot prices fall w-o-w: The benchmark iron ore fines index dropped by $4/t w-o-w to $104/ t CFR China on 26 March. Seaborne iron ore prices dropped due to weak demand for raw materials from the struggling steel industry along with weak steel demand. Market participants expressed apprehension over the slow recovery of downstream steel demand and its effect on iron ore purchases.
  
  
• DCE futures fall w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for May 2024 contract decreased by RMB 18/t ($2.5/t) to RMB 805.5/t ($111/t) on 27 March compared to the last week. On a d-o-d basis, prices inched down by RMB 9/t ($1/t) today.
  
  
• Pellet inventories at Chinese ports fall: Pellet inventories at China's major ports decreased by 0.3 mnt to 7.6 mnt on 21 March compared to the last week, according to SteelHome data.
  
  

Outlook:

As per BigMint's analysis, pellet export offers are expected to remain under pressure in the coming days following bearish market fundamentals in China and low interest for pellets in the seaborne market.