India: Pellet export index up by $2/t w-o-w on rise in global iron ore fines prices

• Chinese portside pellet inventories rise w-o-w
  
  
• Domestic-export realisation continues to narrow
  
  

The seaborne market for Indian-origin pellets received some support this week due to a rise in global fines prices and improved inquiries. However, the market still remained sluggish, with no significant deals concluded as buyers and sellers struggled to align on pricing.

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) rose by $1.50/t w-o-w to $98/t on 27 November 2024. No export deal was concluded in this publishing window with bid-offer disparity witnessed in the seaborne market.

A prominent southern India-based seller is now offering material in the domestic market after recent export tenders saw some low bids. Market dynamics suggest caution following the OMC auction, which has pressured domestic pellet prices. Nevertheless, domestic prices remain favourable compared to exports.

The gap between export and domestic realisations continued to narrow. Domestic prices are higher than export offers by INR 1,250-1,300/t ($15/t). Pellet (Fe63%) prices in Odisha's Barbil decreased by INR 400/t ($5/t) w-o-w to INR 7,650/t ($91/t) exw. Meanwhile, ex-plant realisation in exports from Barbil rose by INR 100-150/t ($1-2/t) w-o-w to INR 6,350-6,400/t exw ($75/t).

A pellet producer from eastern India commented: "In the export market, we are aiming for a price of $115/t CNF to China for pellet cargo, because we expect an upward momentum. We are expecting to close some deals soon, once prices stabilise. However, Chinese mills are cautious, opting for cheaper materials to protect margins, and high inventory levels at their ports have reduced demand for imported pellets."

Pellet prices have improved in the export market. However, some participants believe this is merely a reflection of increased prices on paper, following a rise in global tags. The physical transactions are yet to be finalised, which may lead to increased optimism among market participants regarding their upcoming export deals.

A trader, observing the current market dynamics, said: "Exporters expect a positive price trend in December, driven by restocking activities before the Chinese New Year holidays in January 2025. The market will likely see a pick-up in demand as Chinese mills prepare for the holiday season. While uncertainties persist, sellers remain hopeful of a more favourable market in the coming weeks."

Interestingly, some Chinese buyers are sourcing raw materials, such as lumps, from Africa, citing cost advantages.

Pellet inventories at China's major ports increased by 0.25 mnt to 5.15 mnt on 21 November compared to last week, according to Steelhome data.

Rationale

• No pellet export deal was recorded in the last week; thus, this category was not taken into consideration for price calculations and accorded 0% weightage in the index calculation. Click here for detailed methodology.
  
  
• Eleven (11) indicative prices were received and six (6) were considered for calculation of the index and given a 100% weightage.
  
  

Factors impacting pellet exports

• China iron ore fines prices range-bound w-o-w: The benchmark iron ore fines index inched up by $1$/t w-o-w to $103/t CFR China on 26 November driven by winter restocking ahead of the Chinese New Year in January 2025. While some mills maintained low inventories following high port stocks and import losses, others resold cargoes amid decent liquidity for medium-grade fines. Mills strived to keep blast furnace feed ratios flexible; but planned maintenance may restrict price hikes.
  
  
• DCE futures up w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the January 2025 contract rose by RMB 17.5/t ($2/t) w-o-w to RMB 792/t ($110/t) on 27 November. On a d-o-d basis, futures prices increased by RMB 9/t ($1/t) against yesterday's RMB 783/t ($109/t).
  
  
• Portside pellet prices in China rise w-o-w: Chinese sources said that Qingdao portside offers for Indian pellets (Fe 63.5%) increased by RMB 25/t ($3.5/t) w-o-w to RMB 945/t ($131/t) on 27 November, inclusive of all import taxes and port charges.
  
  

Outlook

According to BigMint estimates, pellet prices trends in the seaborne market will likely remain uncertain. However, there is a possibility of prices improving ahead of the Chinese restocking for January.