India: BigMint's pellet export index rises $7/t tracking hike in iron ore spot prices

• Iron ore futures, spot prices edge up w-o-w
  
  
• Gap narrows between pellet export and domestic prices
  
  

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) increased by $6.5/t w-o-w to $103.5/t on 3 July 2024. An eastern India-based pellet producer concluded an export deal for 60,000 t of pellets (Fe63%, SiO2+ Al2O3- 8%) at around $116-117/t CFR China for July shipment last week. Meanwhile, a major pellet exporter sold a few cargoes at around $114/t CFR China recently, as per sources. However, deals had not been confirmed by any buyer or seller yet at the time of publishing this article.

A 50,000 t pellets (Fe 63%, Al2O3+SiO2 8%) export tender by a South Indian producer did not fetch bids last week. The producer did not accept the bids received and cancelled the tender.

The seaborne pellet market witnessed active trades over the last week as buyers showed interest in Indian material. A few exporters are optimistic that offers might trend up in the coming days.

An Odisha-based producer said: "Supportive prices from buyers and improved market sentiments kept Indian seaborne pellet prices higher with some deals by eastern India-based producers heard concluded. This rise in pellet export prices is due to the recent surge in iron ore fines prices and higher pellet premiums ahead of the third Plenum in the China. There are still expectations of additional stimuli from the upcoming Third Plenum scheduled for 15-18 July which is expected to focus on deepening reforms."

An exporter said that the gap between domestic and export prices have narrowed this week following the drop in domestic pellet prices over the last one week. Due to the recovery in India's sponge iron and steel markets, decent demand has been witnessed in the country over the last few days.

However, domestic prices are still around INR 650-750/t ($7-9/t) higher than exports. Pellet (Fe 63%) prices in Odisha's Barbil fell by INR 200/t ($2.5/t) w-o-w to INR 7,450/t exw ($89/t). However, ex-plant realisation for pellet exports in Barbil was recorded at INR 6,700-6,800/t exw ($84/t).

A China-based source commented, "The premium for iron ore lump remained stable over the week, and some market participants are considering pellets and non-mainstream iron ore lump as substitutes. It has been reported that some deals were closed for Indian pellets further raising the premium".

Rationale:

• One (1) pellet export deal was recorded in this publishing window but not taken under price calculations. Hence accorded 0% weightage in the index calculation Click herefor detailed methodology.
  
  
• Ten (10) indicative prices were received and eight (8) were considered for calculation of the index and given a 100% weightage.
  
  

Factors impacting pellet export market

• Iron ore fines prices up w-o-w: The benchmark iron ore fines index increased w-o-w by around $7/t to $111/t CFR China on 2 July. Prices rose amid some new trading activity at the start of the month. The main focus is on the upcoming third plenary session in mid-July, which may introduce more specific policy benefits.
  
  
• DCE futures rise w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the September 2024 contract rose by RMB 38/t ($5/t) w-o-w at RMB 864/t ($118/t) on 3 July. On a d-o-d basis, future prices increased by RMB 21/t ($3/t) against RMB 843/t ($115/t) yesterday.
  
  
• Portside pellet prices supportive: Chinese sources said that Qingdao portside offers for Indian pellets (Fe 63.5%) increased by RMB 15/t ($2/t) w-o-w at around RMB 1,005/t ($137/t) on 3 July, inclusive of all import taxes and port charges. Meanwhile, prices rose by RMB 10/t ($1/t) d-o-d.
  
  
• Pellet inventories up w-o-w: Pellet inventories at China's major ports inched up by 0.2 mnt to 6.7 mnt on 27 June, 2024 compared to the last week, according to SteelHome data.
  
  

Outlook

BigMint notes that the seaborne pellet market may remain supportive in the near term as Chinese mills are regularly inquiring about Indian material amid expectations that stimulus announcements may lead to positive crude steel production sentiments in China in the near term.