India: BigMint's pellet export index stable w-o-w even as trade remains muted

• Domestic realisation better than exports
  
  
• Only port-based plants interested in overseas markets
  
  
• Iron ore spot prices, futures drop w-o-w
  
  

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) remained unchanged w-o-w at $109/t on 29 May 2024. No deal was recorded from the east coast in this publishing window, as per data maintained by BigMint. Sellers remained cautious amid bid-offers disparity and favourable domestic margins.

Indian pellet offers in the export market were muted as no trading activity was witnessed amid sluggish demand from buyers. Poor market sentiment in China kept buyers away from the market.

Domestic pellet offers increased sharply by around INR 500-800/t ($6-10/t) in the last one week in the central and eastern regions. Pellet producers are targeting to sell material in the domestic market amid better margins.

A key pellet exporter from India, KIOCL has resumed plant operations in Mangalore with effect from today, i.e., 29 May 2024, the company informed via a press release. The pellet producer had suspended its production at the plant for around three months (from 24 February 2024) amid downward trend in market conditions.

An exporter from eastern India said that the domestic realisations are better than the overseas markets. Current export prices for Fe 63% pellets are only viable for those plants with stocks at ports and are at $122-123/t CFR China. The other producers are trying to sell material in the domestic markets.

In the meantime, domestic prices are around INR 1,600/t ($19/t) higher than export offers. Pellet (Fe 63%) prices in Barbil rose by INR 750/t ($9/t) w-o-w at INR 9,100/t exw ($109/t). However, ex-plant realisation for pellet exports in Barbil remained stable w-o-w at INR 7,450-7,500/t exw ($89-90/t).

A pellet producer stated, "We have not recently offered our products in the international market due to price trends. We have had a few enquiries at $107-108/t FOB on the East Coast, which is about $3-4/t higher than the Fe 62% index. However, we are currently selling our product at $113-115/t ex-plant in the domestic market. We are hoping for a price increase before selling in the export market over the next few days".

On the other hand, Chinese sources said that Qingdao portside offers for Indian pellets (Fe 63.5%) remained largely stable w-o-w on 29 May. Offers were recorded at around RMB 1,035/t ($142/t), inclusive of all import taxes and port charges. However, portside offers rose by around RMB 10/t ($1/t) d-o-d.

Chinese steelmakers expect some price corrections due to piling up of port stocks amid oversupply from the imported market. The demand for construction materials in China has decreased, so the price uptrend may not continue.

Rationale:

• No pellet export deal was recorded in this publishing window and hence accorded 0% weightage in the index calculation Click here for detailed methodology.
  
  
• Eleven (11) indicative prices were received, out of which seven (7) were considered for calculation of the index and given a 100% weightage.
  
  

Market dynamics

• Iron ore spot prices fall w-o-w: The benchmark iron ore fines index decreased w-o-w by around $3/t to $118/t CFR China on 28 May, 2024. The prices fell over the week amid expectations of a drop in steel demand and prices. Oversupply of iron ore and high stock levels at Chinese ports continue to suppress prices. Landing margins have recently been poor, leading some steel mills to restock only as needed to maintain favourable production margins.
  
  
• DCE futures fall w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the September 2024 contract decreased by RMB 30/t ($4/t) w-o-w to RMB 891 ($122/t) on 29 May, 2024. On a d-o-d basis, future prices rose by RMB 8.5/t ($1/t) against RMB 882.5/t ($121/t) yesterday.
  
  
• Pellet inventories drop w-o-w: Pellet inventories at China's major ports inched down by 0.3 mnt to 6.9 mnt on 23 May, 2024 compared to last week, according to SteelHome data.
  
  

Weekly exports increase

India's pellet exports were recorded at around 164,000 t in the fourth week of May compared to 251,550 t in the third week, as per vessel line-up data maintained with BigMint.

Outlook

Pellet export offers in the seaborne market are expected to remain volatile along with active deals in the coming days as the port-based plants are continuously under negotiations to conclude deals.