India: BigMint's pellet export index rises on improved trades

• Couple of export deals concluded from eastern India
  
  
• Slight drop in inventory at Chinese ports supports imports
  
  

Indian pellet prices in the seaborne market rose following some deals heard concluded by sellers over the last one week. BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) increased by $4.5/t w-o-w to $97.5/tonne (t) on 7 August 2024.

An eastern India-based producer finalised an export deal for 75,000 t of pellets (Fe62%, 8% SiO2+ Al2O3) this week at around $111/t CFR China for August shipment. In another deal concluded towards the end of last week, an Odisha-based producer sold 50,000 t of pellets (Fe63) at around $107/t CFR China for August shipment.

However, an export tender of around 50,000 t of pellets (Fe63%, 8% SiO2+ Al2O3) by a south India-based pellet producer was cancelled last week due to sluggish response from buyers as the bid level remained lower than expectations.

As per sources, in the last one week, pellet demand was seen in the overseas markets. However, as per market participants, bid-offer disparity is weighing on deals despite pockets of demand.

A pellet producer said, "A few Odisha-based sellers sold cargos at competitive prices at $110-112/t CFR China. We are not offering in the export market following lower realisation and higher production costs. Recently, prices in the seaborne market for premium grade surged due to lower inventory at Chinese ports."

Notably, domestic prices in India are still INR 600-700/t ($8-9/t) higher than exports. Pellet (Fe 63%) prices in Odisha's Barbil fell by INR 100/t ($1/t) w-o-w to INR 6,950/t exw ($83/t). However, ex-plant realisation for pellet exports in Barbil rose by INR 400/t ($5/t) w-o-w to INR 6,200-6,300/t exw ($74-75/t).

In the Chinese market, profit margins for steel mills are declining, but production cuts implemented so far may not sufficiently curb procurement appetite. Despite relatively low iron ore inventory, procurement has mainly focused on portside material due to weak import margins.

Rationale:

• No pellet (Fe63%) export deals were recorded taken under price calculations. Hence these were accorded 0% weightage in the index calculation Click here for detailed methodology.
  
  
• Twelve (12) indicative prices were received and ten (10) were considered for calculation of the index and given a 100% weightage.
  
  

Factors impacting pellet exports

• Iron ore fines prices up w-o-w: The benchmark iron ore fines index rose by $3/t w-o-w to $102/t CFR China on 6 August. Prices rose amid recovering physical fundamentals and market attentiveness to macroeconomic news. Resilient crude steel production and some destocking activities at Chinese ports have bolstered demand. Moreover, to minimise losses, certain steel mills are decreasing the production of molten iron and purchasing cheaper low-grade fines.
  
  
• DCE futures down w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the September 2024 contract dropped by RMB 19/t ($3/t) w-o-w to RMB 749/t ($104/t) on 7 August. On a d-o-d basis, futures prices fell by RMB 14/t ($2/t) against RMB 763/t ($106/t) yesterday.
  
  
• Portside pellet prices in China stable w-o-w: Chinese sources said that Qingdao portside offers for Indian pellets (Fe 63.5%) remained unchanged w-o-w at RMB 945/t ($129/t) on 7 August, inclusive of all import taxes and port charges. Meanwhile, prices inched down by RMB 5/t ($1/t) d-o-d.
  
  
• Pellet inventories at Chinese ports drop w-o-w: Pellet inventories at China's major ports decreased by 0.3 mnt to 5.95 mnt on 1 August, 2024 compared to last week, according to SteelHome data.
  
  

Outlook

BigMint notes that seaborne pellet offers may remain volatile following the low import margins for Chinese steel mills. Heavy monsoon rainfall in India is also impacting export activities.