India: SteelMint's pellet export index rises by $5/t w-o-w on global price uptick

• Export offers remain supported by iron ore futures
  
  
• Active deals gave clear direction to the market
  
  
• China banks policy revived liquidity
  
  

SteelMint's India pellet (Fe 63%, 3% Al) export (FOB east coast) index increased by $5/t w-o-w to $131/t on 27 December 2023. In this publishing window, One export deal of 55,000 t raw pellets (Fe 63%) from eastern India was concluded at $145/t CFR China last week.

In another deal heard last week, a south India-based pellet maker had floated an export tender for 100,000 t of material (Fe 63%; Al2O3- less than 2%) on 21 December, 2023. As per sources, the tender was heard concluded at around $137-138/t FOB.

Eastern India-based sellers commented "We are not offering in the export market amid internal consumption in our integrated steel plants. However, export offers from buyers increased this week and some sellers sold at viable offers.

On the other hand, domestic pellet prices increased sharply in the central-eastern region of India amid higher production costs as iron ore fines after bids rose in the OMC auction. The current domestic offers are at INR 8,900-9,900 ($108-120/t) exw and following these prices no one going to accept transactions at lower export prices."

Another trader said: "buyers are still available for pellets in the seaborne market but low-grade fines were the first choice due to thin margins. Additionally, the prices are being floated in the market but demand remained lower. However, The buyers may book raw pellets aggressively at the beginning of next month in CY'24 for restocking."

As per reports, the result of significant Chinese state-owned banks' reductions in deposit interest rates following expected to increase liquidity before the new year 2024 which provides ease to buyers for booking seaborne material. Meanwhile, Chinese domestic steel prices are up w-o-w, following the upward trend in SHFE futures contracts.

However, according to the China Iron & Steel Association (CISA), most regions in China have entered winter, and steel demand from the construction and manufacturing industries may decline as the days turn colder. This may also impact the raw material demand in the coming days.

Rationale:

• One deal of pellet export was recorded and taken into consideration. It was given 50% 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 50% weightage.
  
  

India's pellet export shipments stood at 278,700 t in the third week of December, compared to 395,378 t in the second week of December, as per the vessel line-up data maintained with SteelMint.

Market highlights:

• Exports and domestic realisations shrank: Domestic pellet (Fe 63%) prices increased by INR 600/t ($7/t) w-o-w to INR 8,900/t ($107/t)exw in Barbil, eastern India. On the other hand, SteelMint's pellet export ex-plant price realisation for the Barbil region increased to around INR 9,200-9,300/t ($110-112/t) exw this week. However, export realisation is still higher by INR 200-300/t ($2.5-4/t) against domestic market.
  
  
• Global iron ore prices rise w-o-w: The benchmark Fe62% fines index increased by $7/t w-o-w to $141/t CFR China on 26 December. The prices of iron ore fines in China increased due to a high demand for re-stocking by steelmakers before the Chinese New Year holidays. Market participants expect this re-stocking trend to continue until early January, followed by a surge in demand in the portside market. In another way, they are seeking iron ore at a reasonable price for cost-effectiveness.
  
  
• DCE iron ore futures sharply up w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for May 2024 contract sharply increased by RMB 46.5/t ($7/t) to RMB 985.5/t ($138/t) on 27 December compared to RMB 939/t ($132/t) a week before. However, on a d-o-d basis, prices remained largely stable as against RMB 983.5/t ($137/t).
  
  
• Port inventories in China stable: Pellet inventories at China's major ports remained largely stable at 4.15 mnt on 21 December compared to 14 December.
  
  

Outlook:

As per sources, pellet offers in the overseas markets may remain northward amid restocking activity before the upcoming Lunar Holidays. The improved liquidity after positive macroeconomic factors in China expected to support the Indian pellets in the overseas market.