India: SteelMint's pellet export index falls by $2/t w-o-w on limited trade

SteelMint's India pellet (Fe 63%, 3% Al) export (FOB east coast) index decreased by $2/t w-o-w to $126/t on 20 December 2023. In this publishing window, no deals of raw pellets from India were concluded for China.

State-owned KIOCL has floated a tender for exports of 55,000 t of iron ore pellets (Fe63%, 8% Al2O3 + SiO2). The due date for submission of bids is from 4 pm on 20 December 2023 to 4 pm on the following day. The tender has been floated only for KIOCL's empanelled customers.

Eastern India-based sellers said: "Inquiries from buyers in the seaborne market are still coming in but lower compared to previous weeks; however, it was not able to offer the material at cheaper offers due to rising production costs in the domestic market and rising freight charges in the seaborne market. The railway is available at premium prices to transport the raw materials to the plant also contributing to the rise of production costs. Notably iron ore fines bids in yesterday's OMC auction increased by INR 400-1,100/t for most of the higher grades lots.

One export deal for 55,000 t of pellets (Fe 62%) was concluded at $143-144/t CFR for non-Chinese markets last week. Another pellet maker said that they are holding the raw pellet export offers for the overseas markets amid low realisation. Snowfall has a major effect on transportation and the demand for downstream construction supplies in northern regions of China. The lower import margin for higher-grade raw materials for China's steelmakers also pushed down Indian raw pellet offers from buyers in the export market.

Rationale:

• No deal of pellet export was recorded and taken into consideration. It was given 0% weightage in index calculation Click here for methodology.
  
  
• Nine (9) indicative prices were received, and eight (8) were considered for calculation of the index, and given a 100% weightage.
  
  

India's pellet export shipments stood at 395,378 t in the second week of December, compared to 207,397 t in the first week of December, as per the vessel line-up data maintained with SteelMint.

Market highlights:

• Exports and domestic realisations narrow: Domestic pellet (Fe 63%) prices improved by INR 250/t w-o-w to INR 8,300/t exw in Barbil, eastern India. On the other hand, SteelMint's pellet export ex-plant price realisation for the Barbil region fell slightly at around INR 8,800/t exw this week. Thus, the export realisation is still higher by INR 500/t compared to the domestic market.
  
  
• Global iron ore prices down w-o-w: The benchmark Fe62% fines index fell by $4/t w-o-w to $134/t CFR China on 19 December. Challenges in iron ore procurement arose from heavy snowfall in the Tangshan region, hindering the direct transportation of portside iron ore to mills and causing disruptions in portside activities. Sintering constraints and fluctuations in coking coal prices influenced iron ore prices, with steel mills operating under narrow margins.
  
  
• DCE iron ore futures fall w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for May 2024 contract decreased by RMB 9/t ($1/t) to RMB 939/t ($132/t) on 20 December compared to RMB 948/t ($133/t) a week before. However, on a d-o-d basis, prices increased by RMB 16/t ($2/t) against RMB 923/t ($129/t).
  
  
• Port inventories in China decrease: Pellet inventories at China's major ports fell by 0.2 mnt to 4.1 mnt on 14 December compared to 7 December.
  
  

Outlook:

As per sources, pellet offers in the overseas markets may remain under pressure in the coming days amid the sluggish demand under extreme winter conditions. Also, upcoming holidays may keep inquiries on the lower side.