India: BigMint's pellet export index drops over $7/t w-o-w

• Bid-offer gap widens
  
  
• Domestic prices, too, under pressure
  
  

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) decreased by $7.5/tonne (t) to $97.5/t on 13 March 2024. No deals were recorded from the east coast of India in this publishing window.

The pellet export market dropped this week amid sluggish sentiment and lack of demand from Chinese buyers. Bids from buyers were recorded at low levels against sellers' offers due to poor finished steel demand in the domestic Chinese market. Also, pellet inventories at the portside have increased to a one-year high.

An eastern India-based pellet-maker said: " The current floating prices in the seaborne market are not viable for us. Demand for pellets has dampened and buyers are avoiding bookings. We are ready to sell material at over $115/t CFR China but no one is willing to pay these prices."

Some active enquiries for pellet from buyers were recorded but there was a big mismatch in bids and offers. Indian offers were not feasible for Chinese participants owing to poor margins in finished steel. Buyers' bids were not viable for sellers due to high production costs in the eastern region.

Another producer said: "A few plants have already taken maintenance shutdowns in eastern India as they are unable to sell premium material in the export market. We are in a wait-and-watch mode".

On the other hand, Chinese sources said that portside offers for Indian pellets (Fe 63.5%) have declined by around RMB 70/t ($10/t) w-o-w on 13 March. Offers were recorded at around RMB 965/t at ($134/t) Qingdao, inclusive of all import taxes and port charges.

Finished steel demand in the construction and infrastructure sectors has dropped amid sluggish macroeconomic factors. Some steel mills have started blast furnace maintenance and production controls, which may further stabilise steel prices.

Billet prices in Tangshan fell by RMB 80/t ($11/t) w-o-w to RMB 3,400/t ($472/t) on 13 March. Prices include 13% VAT. Fewer deals would occur as a result of offer prices declining since buyers will anticipate more price reductions.

India's pellet export shipments stood at 139,250 t in the first week of March compared to 183,480 t in the last week of February, as per vessel line-up data maintained with BiglMint.

Why are pellet export prices under pressure?

• Decent domestic realisation: Domestic pellet realizations were higher by INR 1,300/t ($14/t) compared to exports. In the local markets, pellet (Fe 63%) prices remained stable w-o-w at INR 7,850/t exw ($95/t) in Barbil, eastern India. BigMint's pellet export ex-plant price realisation for Barbil declined to INR 6,500/t exw ($78-79/t) this week.
  
  
• Iron ore spot prices decline w-o-w: The benchmark iron ore fines price dropped by $7/t w-o-w to $110/ t CFR China on 12 March. Seaborne iron ore dropped after it was noted that macroeconomic news had weakened market confidence and more production restriction are expected.
  
  
• Sharp drop in future prices w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for May 2024 contract decreased by RMB 74/t ($10/t) to RMB 807.5/t ($112/t) on 13 March compared to last week. On a d-o-d basis, prices fell by RMB 24/t ($3/t) largely stable.
  
  
• Pellet inventories at Chinese ports rise: Pellet inventories at China's major ports rose by 0.15 mnt to 7.8 mnt on 6 March compared to last week, according to SteelHome data. Pellet inventory at ports was recorded at a one-year high, as per SteelHome data.
  
  

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.
  
  
• Eleven (11) indicative prices were received, and seven (7) were considered for calculation of the index, and given a 100% weightage.
  
  

Outlook:

As per BigMint's analysis, pellet export offers are expected to remain volatile as Chinese buyers are looking for cheaper materials of low- to medium-grade fines. Weak economic factors in the Chinese market will also weigh on Indian pellet prices.