Indian pellet export index hits a new high on active Chinese buying

Indian pellet export prices have rallied to all time high as per data maintained with SteelMint since 2012. SteelMint weekly pellet export index (FOB east coast India) for Fe 64% grade has increased by $3.5/t w-o-w to $208/t in the recent deal.

A West Bengal-based pellet maker has recently concluded a pellet (Fe 63% grade, 4% Al) export deal for around 50,000 t at $223-224/t CFR China. The deal was concluded early this week and shipment is scheduled in mid-June'21, credible sources have confirmed SteelMint. Prices have increased by around $5 against the deal reported last week.

Chinese steel mills are showing good demand for high grade raw material in order to maintain the lower-emission amid strict sintering restrictions. Restocking by the mills is also ongoing ahead of the approaching labour holiday between 1-5 May. Thus, pellets with low Alumina content are fetching a premium over standard grade pellets (with high Al). Price indications for pellets having low Alumina content (1.5%) are around $240-245/t CFR China as per the trade sources.

Spot iron ore prices hit a record high - China spot prices for Fe 62% fines has picked up to $193.85/t, CNF China assessed on 27th Apr. The prices are hovering at over 10-year high levels due to rise in infrastructure demand. Similar price level was last witnessed towards Feb'11 at $196/t, CNF China. The current steel prices and margin suggest an expected continuous rise in the price trend. The price rise is favoured by tight supply caused due to seasonal production reduction from Brazil and Australia in the last three months. Also, demand for high grade iron ore continues with Chinese government policies aimed at curbing its resurgent pollution problem observed in recent months.

Rationale:

• One pellet export deal was concluded in this publishing window and considered for price calculation as T1 inputs and kept the weightage of 50% in this index.
  
  
• Apart from trades, SteelMint has also received eight (08) indicative prices, offers and bids (T2). Seven (07) were considered as T2 trades and given weightage of another 50% in this index.
  
  

Freight rates remain stable this week- Freight rates for 50,000-55,000t export vessels from east coast India (Paradip) to China remained stable at $ 16-18/t against last week.

Pellet inventories at Chinese ports unchanged- Pellet inventory at major Chinese ports remains standstill at 5.2 mn t last week against as per data maintained by SteelHome.

Domestic pellet trade turn weak amid second wave of pandemic- SteelMint's bi-weekly domestic pellet index "PELLEX " remained stable at INR 14,550/t ($196) DAP Raipur in a recent deal. Raipur market may face tighter pellet availability in the upcoming weeks once the COVID situation improves. A couple of pellet makers have scheduled exports dispatches next month. Therefore, pellet prices are expected to remain supported in the near short term. However, trades have turned slow due to decline in sponge prices as a result of reduced steel capacity utilization owing to lockdown measures to curb the pandemic.