India: SteelMint's pellet export index drops $2/t w-o-w in absence of active deals

SteelMint's India pellet (Fe 63%, 3% Al) export (FOB east coast) index decreased by $2/t w-o-w to $99/t on 16 August, 2023. No deal was heard this week owing to bid-offer disparities from China. As per sources, there are no inquiries from other regions like Southeast Asia, the Middle East, and Europe either.

As per reports, the People's Bank of China (PBOC) lowered the one-year Medium-term Lending Facility (MLF) rate to 2.50% from 2.65% on 15 August 2023 as a sign that the government may be ramping up monetary easing efforts to boost a sputtering economic recovery. However, concerns about the downward impact on the Chinese economy are being expressed by market buyers. The downstream steel market was expected to decline even further, which would affect the demand for iron ore and pellets.

Rationale:

• No deal was recorded this week and was not taken into consideration. It was given 0% weightage in index calculation.
  
  
• Seven (7) indicative prices were received, and six (6) were considered for calculation of the index, and given 100% weightage.
  
  

Market highlights:

• Gap between export-domestic prices widens: Domestic pellet (Fe 63%) prices stood at INR 7,700/t loaded on to wagon in Barbil, eastern India. On the other hand, SteelMint's pellet export ex-plant price realisation for the Barbil region fell further by INR 300/t w-o-w to INR 6,600-6,700/t exw this week.
  
  
• Global iron ore prices stable: The benchmark Fe 62% fines index inched down by $0.7/t w-o-w to $104.1/t CFR China on 15 August. The lack of a specific steel production control policy is still supporting iron ore buying. However, seaborne iron ore prices dropped on weak buying interest amid reports of poor macro-economic data released by the People's Bank of China.
  
  
• DCE iron ore futures rise: Iron ore futures on the Dalian Commodity Exchange (DCE) for January 2024 contract increased by RMB 15.5/t ($2/t) w-o-w to RMB 738.5/t ($101/t) on 16 August compared to RMB 723/t ($99/t) last week. However, prices remained stable d-o-d.
  
  
• China pellet port inventories fall w-o-w: Pellet inventories at China's major ports decreased by 0.7 mnt to 4.95 mnt on 10 August compared to the previous week. This is the lowest level of pellet inventory in the last one year - previously it was seen in the first half of June 2022.
  
  

However, India's pellet export shipments stood at 291,127 tonnes (t) in the second week of August compared to 182,532 t in the first week of August, as per the vessel line-up data maintained with SteelMint.

The current market is full of uncertainty and buyers are also not offering supportive pellet prices. However, pellet makers are expecting a positive trend in pellet prices in the coming days and are currently in wait-and-watch mode.