India: BigMint's pellet export index under pressure amid bearish seaborne market sentiments
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- China market remains muted during holidays
- Continuous drop in spot and future iron ore prices
- High pellet inventory levels sustain at ports
BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) inched down by $1/t w-o-w to $95/t on 12 June 2024. No deal was recorded from the East Coast in this publishing window, as per data maintained by BigMint.
The pellet export prices in the seaborne market remained southward as sellers faced challenges to sell the material amid lower margins. The buying interest from the Chinese steelmakers was sluggish for the Indian premium material as higher pellets inventory was reported at the Chinese ports. The drop in the spot iron and future prices during Dragon Boat holidays impacted the seaborne market.
The benchmark iron ore fines index decreased w-o-w by around $3/t to $104/t CFR China on 11 June. Prices fell due to weak market fundamentals post-Dragon Boat Festival. The upcoming rainy season will significantly impact transportation and outdoor construction at downstream sites.
A pellet exporter commented, " There was no buying interest from the Chinese buyers as the recent steel production cut weighed down the pellet demand in the Chinese market also they are more focusing on lumps at cheaper prices. The infrastructure sector in China is down amid rainfall in some regions."
On the other hand, domestic prices are around INR 2,000/t ($24/t) higher than export offers. Pellet (Fe 63%) prices in Barbil fell by INR 550/t ($7/t) w-o-w to INR 8,350/t exw ($100/t). However, ex-plant realisation for pellet exports in Barbil fell by INR 100/t ($1/t) w-o-w to INR 6,300-6,400/t exw ($76-77/t).
A few sources claimed that the pellet exporters were experiencing negative margins due to the higher-than-average prices for iron ore fines, which raised the cost of producing pellets in the central-eastern region. The main pellet exporters are holding their material to sell in the export market while they wait for the market to improve.
Chinese sources said that Qingdao portside offers for Indian pellets (Fe 63.5%) dropped by RMB 25/t ($3/t) w-o-w on 12 June. Offers were recorded at around RMB 970/t ($132/t), inclusive of all import taxes and port charges.
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
- DCE futures fall w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the September 2024 contract decreased by RMB 14.5/t (2/t) w-o-w to RMB 810.5 ($111/t) on 12 June, 2024. On a d-o-d basis, future prices remained largely stable against RMB 806/t ($110/t) yesterday.
- Pellet inventories stable w-o-w: Pellet inventories at China's major ports remained stable at 6.75 mnt on 6 June, 2024 compared to the last week, according to SteelHome data.
Weekly exports increase
India's pellet exports were recorded at around 353,173 t in the first week of June compared to 135,500 t in the last week of May, as per vessel line-up data maintained with BigMint.
Outlook
Pellet export offers in the seaborne market may remain under pressure following bearish market sentiments from China. The exporters are in wait-and-watch mode but buyers avoid purchasing premium materials due to lower import margins amid lower finished steel demand.
