India: SteelMint's pellet export index drops $3/t w-o-w on muted China demand

SteelMint's India pellet (Fe 63%, 3% Al) export (FOB east coast) index decreased by $3/t w-o-w to $101/t on 9 August, 2023. No deal was heard this week amid muted seaborne market sentiments and the absence of firm inquiries from buyers amid sluggish demand for pellets in China.

As per sources, the Chinese steel market is quiet and mills' margins have narrowed owing to high operating costs. Uncertainty around steel production cuts is also affecting pellet and steel demand.

Indian pellet-makers are in wait-and-watch mode for demand to improve in China. However, they are not selling at prevailing rates as domestic realisations are better compared to exports.

Rationale:

• No deal was recorded this week and was not taken into consideration. It was given 0% weightage in index calculation.
  
  
• Eight (8) indicative prices were received, and four (4) 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 to INR 6,600-6,700/t exw this week.
  
  
• Global iron ore prices fall: The benchmark Fe 62% fines index fell significantly by $4.75/t w-o-w to $104.8/t CFR China on 8 August. Iron ore (Fe 62%) fines spot prices decreased due to extreme weather conditions in different cities. Some regions in North China remain affected by floods and heavy rains which is weighing on construction steel as well as iron ore demand.
  
  
• DCE iron ore futures decline: Iron ore futures on the Dalian Commodity Exchange (DCE) for January 2024 contract decreased significantly by RMB 108/t ($15/t) w-o-w to RMB 723/t ($100/t) on 9 August compared to RMB 831/t ($115/t) last week. Meanwhile, prices increased by RMB 7/t ($1/t), d-o-d.
  
  
• China pellet port inventories fall w-o-w: Pellet inventories at China's major ports decreased by 0.35 mnt to 5.65 mnt on 3 August compared to the previous week.
  
  

However, India's pellet export shipments stood at 182,532 tonnes (t) in the first week of August compared to 171,500 t in the last week of July, as per vessel line-up data maintained with SteelMint. Notably, Indian pellet exports increased over 30% m-o-m to 0.67 mnt in July. BRPL was the largest shipper with exports of 0.35 mnt.

As per sources, Chinese steel-makers are waiting for official confirmation on steel production cuts.