India: Pellet export prices drop $3/t w-o-w amid bid-offer disparities

• Domestic offers higher than export tags by $10/t
  
  
• Chinese portside pellet stocks drop to 1-year low
  
  

The Indian pellet export market remained subdued this week, with no significant deals concluded. Indian exporters continued to demand higher prices, driven by better realisations in the domestic market compared to the seaborne landscape. This has created a bid-offer disparity, with buyers seeking cost-effective options, resulting in prolonged negotiations.

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) fell by $3/t w-o-w to $101.5/t on 11 December 2024. This week, no confirmed deals were recorded in this publishing window. However, as per sources, a prominent miner from eastern India sold multiple cargoes at $113/t CFR China.

Market sentiment received a brief boost following the latest Chinese Politburo meeting, which hinted at potential economic support measures. However, the uplift has not yet translated into tangible trade activity, with deals still under negotiation.

The gap between export and domestic realisations widened this week amid a drop in export prices against domestic ones. Domestic prices are higher than export offers by INR 800-850/t ($10/t). Pellet (Fe63%) tags in Odisha's Barbil increased by INR 100/t ($1/t) w-o-w to INR 7,550/t ($89/t) exw. Meanwhile, ex-plant realisation in exports from Barbil stood at INR 6,700/t exw ($81/t).

Commenting on the current market scenario, a trader stated, "Indian sellers are strategically diverting material to domestic coastal movements, where prices are more lucrative. Domestic mills are offering better rates, making exports less attractive at current levels. Last week, a seller sold 50,000 t of pellets to Gujarat-based mills through coastal movement for December loading."

Additionally, global fines and futures indices remained largely range-bound this week, providing little stimulus for international buyers to increase their bids.

Despite the current slowdown, market participants expect an upswing in the coming weeks, as deals for late-January deliveries may be finalised ahead of the Chinese Lunar New Year holiday. "Negotiations are ongoing, and there is optimism that we will see more concluded deals soon," a prominent exporter noted.

Pellet inventories at major ports in China fell by 0.55 million tonnes (mnt) w-o-w to 4.35 mnt on 5 December, according to SteelHome data. This marks the lowest level that portside pellet inventories have reached in the past year, with a similar low last recorded in December 2023.

Rationale

• No deals were recorded this week for T1 trade. Thus, this category was not taken into consideration for today's price calculations and accorded 0% weightage in the index calculation. Click here for detailed methodology.
  
  
• Ten (10) indicative prices were received, and eight (8) were considered for the calculation of the index and given a 100% weightage.
  
  

Factors impacting pellet exports

• Chinese iron ore fines prices unchanged w-o-w: The benchmark iron ore fines index remained stable w-o-w at $106/t CFR China on 10 December, supported by robust trading activity and cooled sentiments following this week's Politburo meeting. As per reports, traders are likely to avoid risks with recent dollar market cargoes, unless offers are highly attractive, as their loading and shipping times coincide with the Lunar New Year. Mills preferred the portside market due to easier liquidity, particularly at eastern ports.
  
  
• DCE iron ore futures down w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the January 2025 contract fell by RMB 10/t ($1/t) w-o-w to RMB 802/t ($111/t) on 11 December. On a d-o-d basis, futures prices remained stable against yesterday's RMB 803.5/t ($111/t).
  
  
• Portside pellet prices in China stable w-o-w: Chinese sources said that Qingdao's portside offers for Indian pellets (Fe 63.5%) remained stable w-o-w at RMB 965/t ($133/t) on 11 December, inclusive of all import taxes and port charges.
  
  

Outlook

According to BigMint's estimates, the Indian pellet export market will remain cautiously optimistic, with hopes that favourable trade conditions and economic cues from China will drive renewed activity.