India's pellet exports drop 25% y-o-y in CY'24 on strong domestic demand, declining Chinese steel output

• Shipments fall to 8.11 mnt in CY'24
  
  
• Chinese demand takes a beating as steel output drops
  
  

India's iron pellet exports declined significantly in CY'24, with a y-o-y decrease of approximately 25%, as per latest BigMint data. Exports stood at 8.11 million tonnes (mnt) as against 10.80 mnt in CY'23. This downturn is primarily attributed to increased domestic consumption and reduced demand from key international markets, especially China.

However, pellet export volumes witnessed a sharp m-o-m increase of around 48% to reach 0.43 mnt in December 2024 compared to 0.29 mnt in November. Export volumes saw a significant recovery in December, driven by increased purchases from China as the country sought to replenish its inventories following the early-October holiday period.

Additionally, favourable pellet export prices supported the recovery, with BigMint's bi-weekly pellet export index declining to approximately $105/tonne (t) FOB East Coast by early-October and further dropping to around $92.5/t FOB by mid-November, facilitating increased export volumes.

Leading exporters in CY'24

Rungta Mines was the largest exporter at 2.86 mnt followed by BRPL at 1.6 mnt, AM/NS India (1.25 mnt) and Thriveni (0.93 mnt). Rungta's export volumes rose by around 7% y-o-y in CY'24.

China: Leading importer

China emerged as the top importer of Indian iron pellets in CY'24, with imports reaching 6.49 mnt. However, this marked a decline of around 31% compared to 9.46 mnt in the previous year. After China came Malaysia and Indonesia importing 0.60 mnt and 0.41 mnt, respectively.

Why pellet exports declined in CY'24?

• Fall in China's crude steel output: China produced around 929.2 mnt of crude steel in 11MCY'24 (January-November'24), a decrease of 2.7% y-o-y, as per data published by the World Steel Association (WSA). The decrease in China's steel production basically stems from lack of domestic demand, with real estate construction and infrastructure sectors continuing to slow down.
  
  
• Increased domestic consumption: The rising importance of pellets in India's iron-making industry is reflected in its growing share in both hot metal production and direct reduced iron (DRI) production. In 11MCY'24, India's DRI production reached approximately 49.42 mnt. Procuring iron ore lumps as feedstock has become more challenging due to longer delivery times compared to pellets. As a result, pellet-based production has been on the rise, with sponge iron producers increasingly preferring pellets over lumps.
  
  
• Higher portside inventories in China: China's portside inventories have remained largely stable at an average of around 6 mnt in CY'24 versus 5.7 mnt in CY'23, as per SteelHome data. Despite a general slowdown in the Chinese steel market, imports have remained relatively high, driven by the strategy of purchasing at lower prices during certain periods to hedge against potential future surges in seaborne prices. However, consistently high inventories have acted as a continual drag on import levels.
  
  

Outlook

The outlook on India's pellet exports in the near term remains challenging due to the combined effects of strong domestic demand, policy uncertainty, and fluctuating global market conditions.

By FY'30, India's steel demand is projected to grow exponentially, largely fuelled by the construction and infrastructure sectors, which are expected to contribute 60-65% of total steel demand followed by auto and general engineering. Factors like urbanisation, the government's housing initiatives, and mega infra projects like Bharatmala and dedicated freight corridors are expected to boost demand.

The share of pellets in hot metal production has risen substantially from 31% to 41%, reflecting its growing role in the blast furnace production process. Similarly, the share of pellets in DRI making now accounts for 41-61 mnt, indicating a marked shift towards higher quality and grades of iron ore pellets by the sponge iron sector. This trend highlights the importance of pellets as a key raw material in meeting the evolving demand of India's iron and steel industry, driven by the need for cleaner, more efficient production methods.