Indian low-grade fines export index stable as high-grade ore demand picks up in China

SteelMint's weekly low-grade iron ore fines (Fe 57%) FoB India index remains range-bound this week. Index stands at $80/t FoB east coast India. Market participants cited strong demand for high-grade (mainstream cargoes) from Chinese mills due to winter production cuts. Vale in its recent press release notified that the company has reduced its iron ore production guidance to 300-305 mn t as against previously set guidance at 310-330 mn t. Also, the miner expects to produce 315-335 mn t in CY '21.

However, demand for Indian origin low grade fines cargo is less strong at the moment. SteelMint learned that there is disparity of $1-2/t between bids and offers.

Price indicators - No export deal heard to be concluded so far this week. Therefore, it was not considered for calculation of index and weightage given 0%. However, the weightage of T1 transferred to calculation of T2 inputs.

SteelMint has received seven indicative prices, offers and bids during the publishing window and all were considered for price calculation as T2 inputs, with an average price of $80/t FoB India.

Rationale: The index has been calculated using an average of T1 and T2 price inputs. Transactions confirmed by either a buyer/seller are designated as T1 input while bids, offers, and indicative prices are designated as T2 inputs. Both T1 and T2 categories of inputs carry 50% weightage each in price calculation for FOB price assessment.

Market highlights -

• Chinese spot iron ore fines price hit 7-years high- Chinese spot iron ore fines (Fe 62%) increased significantly by around $9/t on a weekly basis and stood at $ 136.75/t CFR China yesterday against $128.15/t a week before. On a daily basis spot index increased around $ 3.7/t yesterday. Prices are hovering at 7-year high levels backed by strong demand and supply constraints.
  
  
• Futures also closed higher - Dalian iron ore futures' contract of Jan'21 closed at RMB 937 today against RMB 897 a week back.
  
  
• According to the sources, demand for low-grade ore is better this week. However, there are still plenty of low-grade iron ore fines inventories lying at China ports as per the sources.
  
  
• SteelMint's assessment for Indian low-grade iron ore fines (Fe 57%) stands at INR 2,800-3,000/t (ex-mines, incld. Royalty, DMF and NMET).