India: BigMint's pellet export index falls $9/t amid weak Chinese demand

• Global fines spot, future prices fall sharply
  
  
• Domestic-export realisation gap widens
  
  
• Chinese restocking likely ahead of holidays
  
  

Indian pellet prices in overseas markets remained under pressure following a sharp fall in spot prices. Buying interest was on the lower trend as Chinese steel mills preferred low-grade iron ore as feedstock on thinner margin.

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) sharply decreased by $8.5/tonne (t) w-o-w to $88.5/t on 4 September 2024. No pellet export deal was recorded in the last one week amid the downtrending market sentiments. As a result, most eastern India sellers diverted material to the domestic market.

Notably, domestic prices in India are still INR 800-900/t ($10-11/t) higher than export offers. Pellet (Fe 63%) prices in Odisha's Barbil inched down by INR 50/t ($1/t) w-o-w to INR 6,700/t ($80/t) exw, turning the material viable for plants located near the ports. Meanwhile, ex-plant realisation for pellet exports in Barbil decreased by INR 700-800/t ($8/t) w-o-w to INR 5,500-5,600/t ($66-67/t) exw.

A recent export tender for 50,000 t of iron ore pellets (Fe 63%, 8% Al2O3+SiO2) floated by a southern India-based producer on 30 August failed to fetch a decent response from seaborne pellet buyers. The tender was cancelled because the bids fell short of the expectations of the seller.

An eastern Indian pellet producer said, "The fall in the recent spot and future prices of fines has weighed on pellet prices in the seaborne market. There were lesser enquiries from buyers as current prices are not viable. We are waiting for prices to rise in the coming days following the expected rise in demand ahead of the Chinese national holidays in the first week of October. Restocking activities are likely to get a boost from Chinese steel mills. So, we are eying the $110/t CFR China levels in the seaborne market for our pellet cargo."

A trader said, "Demand from Chinese mills was very poor. Those who wanted to purchase Indian pellets, did not bid more than $100/t CFR China in the current market which had widened the bid-offer disparity."

However some sellers were optimistic about the market, saying: "Demand for pellets may increase in the upcoming days due to restocking by Chinese mills ahead of the National Holiday starting in the first week of October. It is too early to make definitive comments about holiday restocking, but deals from India are expected to be favourable, according to market participants."

Rationale:

• No pellet export deal was recorded in the last one week and was not taken under price calculations. Hence these were accorded 0% weightage in the index calculation Click here for detailed methodology.
  
  
• Nine (9) indicative prices were received and six(6) were considered for calculation of the index and given a 100% weightage.
  
  

Factors impacting pellet exports

• Iron ore fines prices decline w-o-w: The benchmark iron ore fines index decreased sharply by $8/t w-o-w to $93/t CFR China on 3 September. Prices were influenced by poor market fundamentals, and reduced demand for steel due to a drop in manufacturing confidence as indicated by recent PMI data. The data for August indicates a slight decrease in manufacturing confidence, from 49.4% to 49.1%. Chinese portside prices fell amid poor steel demand.
  
  
• DCE futures sharply down w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the January 2025 contract sharply decreased by RMB 65/t ($9/t) w-o-w to RMB 689.5/t ($99/t) on 4 September. On a d-o-d basis, futures prices fell by RMB 14/t against RMB 703.5/t ($97/t) yesterday.
  
  
• Portside pellet prices in China fall w-o-w: Chinese sources said that Qingdao portside offers for Indian pellets (Fe 63.5%) dropped by RMB 45/t ($6/t) w-o-w to RMB 835/t ($117/t) on 4 September, inclusive of all import taxes and port charges. Meanwhile, prices recorded a fall of RMB 5/t ($1/t) d-o-d.
  
  
• Pellet inventories at Chinese ports down w-o-w: Pellet inventories at China's major ports decreased by 0.25 mnt to 5.35 mnt on 29 August, 2024 compared to last week, according to SteelHome data.
  
  

Outlook

According to BigMint's analysis, prices are likely to remain under pressure due to sluggish demand in China. The recently released PMI index figures have not offered any market encouragement.