- SteelMint pellet export index falls by $5 w-o-w
- Global iron ore prices and Chinese futures exhibit drop
- High production cost, and lower selling prices impact Indian pellet players
SteelMint's India pellet (Fe 63%, 3% Al) export (FOB east coast) index decreased by $5/t w-o-w to $120/t on 17 January 2024. The index has fallen to 2.5-month low as similar price levels were seen in early November, 2023.
The pellet offers in the seaborne market fell sharply following the global iron ore and future prices. Most of the buyers remained sidelined amid poor steel margins and blast furnace shutdown in China.
An eastern India-based pellet seller said, "No active buying for pellets is seen in the seaborne market. We have struggled to receive even a single inquiry in the last one week. It seems that restocking activities by steel mills before the Lunar holiday has been completed in China. A few sellers got inquiries for February laycan but bids were very low against the offers which was not viable for pellet makers at current cost of production."
Another pellet producer said: "The pellet export and domestic markets are not performing well in January. Bids had decreased drastically but simultaneously domestic iron ore fines prices increased in the eastern region which has raised the production cost. The sellers holding the offers but in the near term, we are not seeing any improvement in the market. The next one month will be difficult for sellers to sell material in the export market as Chinese buyers will not be available amid the Lunar Holidays."
South India-based pellet producer, KIOCL has resumed pellet plant operations in Mangalore with effect from i.e., 16 January, 2024, the company informed through a press release. The pellet maker suspended its production at the plant from the last one week amid the non-availability of iron ore fines.
On the other hand, a few Chinese steel sources reported that portside offers in China for Indian pellets (Fe 63.5%) have also decreased by around RMB 30/t ($4/t) w-o-w. Today's offers were recorded at around RMB 1,150/t at ($161/t) Qingdao port inclusive of all import taxes and port charges.
Construction and logistics were slowed this week due to the snowfall in certain regions of northern China. Rebar mills in the mentioned area, however, did not lower their output in line with this. Participants in the market anticipate that these steel mills will provide more rebar to eastern and southern China in the coming weeks.
Rationale:
- No deal of pellet export was recorded and not taken into consideration. It was given 0% weightage in index calculation Click here for methodology.
- Nine (9) indicative prices were received, and six (6) were considered for calculation of the index, and given a 100% weightage.
India's weekly pellet export vessel line up falls
India's pellet export shipments stood at 581,880 t in the second week of January, compared to 259,900 t in the first week of January, as per vessel line-up data maintained with SteelMint.
Market highlights:
- Domestic realisations for pellets higher against export: Domestic pellet (Fe 63%) prices decreased by INR 200/t ($1/t) w-o-w to INR 8,750/t ($106/t) exw in Barbil, eastern India. On the other hand, SteelMint's pellet export ex-plant price realisation for the Barbil also fell by INR 400/t ($5/t) to around INR 8,300-8,400/t ($99-101/t) exw this week. However, export realisation is lowered by INR 350/t ($4/t) against the domestic market.
- Global iron ore prices decline w-o-w: The benchmark Fe62% fines index sharply decreased by $10/t w-o-w to $129/t CFR China on 16 January 2024. The recent drop in prices and improvement in import margin led to the recovery of buying interest in the seaborne market. However, prices remained under pressure amid the extension of blast furnace maintenance shutdown by Chinese steel mills following poor production margins.
- DCE iron ore futures decline w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for May 2024 contract declined by RMB 36/t ($5/t) to RMB 926/t ($130/t) on 17 January compared to 962/t ($135/t) a week before. On a d-o-d basis, prices fell by RMB 12.5 ($2/t) as against RMB 938.5/t ($132/t).
- Pellet port inventories in China inch up: Pellet inventories at China's major ports increased by 0.8 mnt to 5.4 mnt on 11 January compared to 4 January.
Outlook:
As per SteelMint analysis, pellet offers in the overseas markets may remain under pressure and face challenges in the absence of buyers during Chinese New Year holidays.
