India: BigMint's pellet export index rises $6/t w-o-w in recent deal

• Indian Sea-borne prices up amid Chinese recovery
  
  
• Iron ore spot prices, futures increase w-o-w
  
  

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) increased w-o-w by around $6/tonne (t) to $109/t on 22 May 2024. Seaborne prices of Indian premium material recovered following improved market fundamentals in the Chinese steel market. An eastern India-based producer sold a 55,000-tonne (t) pellet (Fe 63%) cargo at $124-125/t CFR China in this publishing window.

A southern India-based pellet producer floated an export tender for 50,000 t of iron ore pellets (Fe 63%, 8% Al2O3+SiO2) today. According to sources, the tender was yet to be concluded till the time of publishing this article.

Indian pellet prices in the overseas market remained upward in the last one week with a few deals concluded. Sentiments have improved as limited deals were concluded from India from last month due to a sluggish market and weak margins. However, a few port-based plants' transaction were under negotiations.

A market participant said: "Pellet manufacturing costs have increased following the recent hike in domestic iron ore prices. Domestic Indian steelmakers also aggressively purchase premium material for pre-monsoon restocking. Following the current market dynamics, port-based plants may opt to sell pellets in the export market while plants which are far from ports will get better margins from domestic pellet sales."

A pellet exporter mentioned that if the Chinese government extends financial aid to markets, this would have an immediate effect on iron ore fines and lumps, and eventually on iron ore pellets. If steel demand is weak in key markets like China, then interest in purchasing premium materials such as iron ore pellets becomes limited. However, as steel consumption gradually improves and margins increase, demand for pellets could remain supported.

In the meantime, domestic realisations exceeded exports by INR 900-1,000/t ($10-12/t). In local markets, pellet (Fe 63%) prices remained stable w-o-w at INR 8,350/t exw ($100/t) in Barbil, eastern India. However, pellet exports' ex-plant realisation for Barbil increased by INR 500/t ($6/t) w-o-w to INR 7,450-7,500/t exw ($90/t) this week.

On the other hand Chinese sources said that Qingdao portside offers of Indian pellets (Fe 63.5%) also increased by around RMB 45/t ($6/t) w-o-w on 22 May, 2024. Offers were recorded at around RMB 1,040/t ($143/t), inclusive of all import taxes and port charges. However, on d-o-d basis, portside offers rose by around RMB 5/t ($1/t).

The Central Bank of China announced a 0.25 percentage point reduction in interest rates on personal housing provident fund loans, effective 18 May, for both first and second sets of loans. Sources expect this policy change to support the real estate market and lead to favourable developments in the coming days.

Rationale:

• One (1) pellet export deal was recorded in this publishing window and hence accorded 50% weightage in the index calculation, Click here for detailed methodology.
  
  
• Nine (9) indicative prices were received, out of which seven (7) were considered for calculation of the index and given a 50% weightage.
  
  

Market dynamics

• Iron ore spot prices rise w-o-w: The benchmark iron ore fines index increased w-o-w by around $6/t to $121/t CFR China on 22 May, 2024. The market was positively affected by recent Chinese policy changes and expectations of heightened demand for steel. As per reports, market sentiment remains positive for the near future, offering additional support for ongoing iron ore prices.
  
  
• DCE futures up w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the September 2024 contract increased by RMB 51/t ($8/t) w-o-w to RMB 921 ($126/t) on 22 May, 2024. On a d-o-d basis, future prices improved by RMB 13/t ($2/t) against RMB 912/t ($126/t) yesterday.
  
  
• Pellet inventories drop w-o-w: Pellet inventories at China's major ports inched down by 0.35 mnt to 7.2 mnt on 16 May, 2024 compared to last week, according to SteelHome data.
  
  

Weekly pellet exports improve

India's pellet exports were recorded at around 251,550 t in the third week of May compared to 168,130 t in the second week, as per vessel line-up data maintained with BigMint.

Outlook

Pellet export offers in the seaborne market are expected to improve along with active deals in the coming days. Participants were optimistic after improved market sentiments from Chinese steelmakers as well as positive policy changes.