India: BigMint's pellet export index falls to 7-years low amid weak market sentiments

• Global iron ore fines prices remain under pressure
  
  
• Domestic-export realisation gap continues to widen
  
  
• Domestic market facing slight supply glut
  
  

Export prices for pellets continued to face pressure this week as major market participants approached trading cautiously and stayed away from the market. BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) decreased by $4.5/tonne (t) w-o-w to $84/t on 11 September 2024. The index fell to over a seven-year low, a similar level was last seen in June 2017. The deals in the seaborne market remained absent amid poor buying interests in China and other Southeast Asian countries amid the continued declining prices of iron ore in the international market.

Global fines prices once again reached $90/t CFR China, and a few buyers inquired about the material at a premium of $5-7/t on the global fines index.

Notably, domestic pellet prices in India are still INR 1,500-1,600/t ($18-19/t) higher than export offers. Pellet (Fe 63%) prices in Odisha's Barbil remained stable w-o-w at INR 6,700/t ($80/t) exw, even the portside pellet makers were not seen interested for exports with these prices prevailing in the market. Meanwhile, ex-plant realisation for pellet exports in Barbil decreased by INR 400-500/t ($5-6/t) w-o-w to INR 5,000-5,100/t ($61-62/t) exw.

Sources said that negative sentiments in the seaborne market were driven by low demand and high inventory lying at the port amid poor steel mill margins in China. Demand side is also not showing any hope. Indian producers have no option but to wait the appropriate time to take any action for export deal.

An eastern Indian pellet producer said, "No improvement is being seen in the pellet export prices this week and prices fell to below $100/t CFR level. Current prevailing market is not viable for Indian sellers' amid poor import margins for China. The spread between domestic and export realisation has continued to widen and moving towards INR 2,000/t."

As a result, most of the Odisha exporters have been diverted their material in the local steelmakers and exploring coastal delivery to steel plants in the southern or western regions. As per the sources, inventory with the eastern based pellet makers are very high.

A trader said, "The Indian major exporters may cut the pellet production in coming days if the export market down further. The domestic market also witnessing the exceeded supply against the demand in the Central Eastern region."

Meanwhile, the demand for pellets and higher-grade fines in the Chinese market have been declining as mills opt for lower to medium-grade fines to cut production costs. The inventories of pellets at Chinese ports relatively high though it has fall a bit, putting pressure on the seaborne pellet prices of Indian-origin material.

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 eight (8) were considered for calculation of the index and given a 100% weightage.
  
  

Factors impacting pellet exports

• Iron ore fines prices drop w-o-w: The benchmark iron ore fines index fell by $3/t w-o-w to $90/t CFR China on 10 September. Market participants held off on purchases or sales of existing inventories, in favour of gaining clarity on the market direction by Oct'24. Most plants maintained low iron ore inventories, enough to support operations for about 1-2 weeks.
  
  
• DCE futures sharply stable w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the January 2025 contract remained largely stable w-o-w at RMB 694/t ($98/t) on 11 September. On a d-o-d basis, futures prices rose by RMB 19/t ($3/t) against RMB 675/t ($95/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 15/t ($2/t) w-o-w to RMB 815/t ($115/t) on 11 September, inclusive of all import taxes and port charges. Meanwhile, prices remained unchanged d-o-d.
  
  
• Pellet inventories at Chinese ports largely stable w-o-w: Pellet inventories at China's major ports decreased by 0.1 mnt to 5.25 mnt on 5 September, 2024 compared to last week, according to SteelHome data.
  
  

Outlook

Based on BigMint's analysis, pellet prices are expected to under pressure amid high inventory and low demand for high-grade material in China. Though Chinese national holidays from 1-10 October may push the market.