India: BigMint's pellet export index edges up, market awaits China's return from holidays

• Pellet offers remain stable in seaborne market
  
  
• Chinese participants quiet during holidays
  
  

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) increased by $1/t w-o-w to $106/t on 1 May, 2024. The export market remained supportive last week following enhanced restocking activity by Chinese steelmakers ahead of the weeklong Labour Day holidays. Around 110,000 tonnes (t) (2 Supramax cargoes) pellet export deals were heard this week from the east coast of India at $120-122/t CFR China but not confirmed yet by the seller or buyer.

A South India-based pellet producer floated an export tender for exports of 55,000 t of iron ore pellets (Fe 63%, 8% Al2O3+SiO2) in the middle of last week. However, the export tender has failed to fetch bids amid low response from buyers.

Indian pellet prices in the seaborne market remained largely stable in the last one week. A few sources reported that it was difficult for Indian sellers to sell at this level as production costs increased after domestic iron ore price hike.

A pellet producer from Eastern India said: "Some participants remain cautious and believe that the market will bounce back post holidays. Meanwhile, Indian iron ore (low-grade) fines continued to be preferred over raw pellets due to a high discount."

Domestic realisations are higher by INR 1,000/t ($14/t) compared to exports. In the local markets, pellet (Fe 63%) prices fell by INR 100/t ($1/t) w-o-w to INR 8,250/t exw ($99/t) in Barbil, eastern India. However, pellet export ex-plant price realisation for Barbil remained largely stable w-o-w at INR 7,200-7,300/t exw ($87/t) this week.

A trader said: "Some pellet producers can sell their products at current prices because their plants are located close to the port, enabling them to sell at $120/t CFR China. But others are holding off for higher prices. Over the past month, demand for raw pellets in the overseas markets has been weak. Chinese buyers have been opting for low-grade fines instead of pellets because they are cheaper than Indian pellets."

Domestic pellet demand is anticipated to remain largely moderate in the near term due to the sharp rise in domestic steel prices this week. Sources report that Indian pellet producers are not rushing to sell in the export market, as they are achieving better returns domestically. Additionally, demand is expected to improve with the approaching seasonal demand before the monsoons.

Chinese sources said that portside offers of Indian pellets (Fe 63.5%) increased by around RMB 25/t ($3/t) w-o-w on 30 April before the Chinese market went into holidays. Offers were recorded at around RMB 995/t at ($138/t) Qingdao, inclusive of all import taxes and port charges.

On the other hand, portside inventory increased. Prices of pellets offered in Chinese ports declined amid lower buying interest for pellets following import margin concerns. A few reports suggest that Chinese steelmakers are opting for lower-grade fines and lumps over pellets because of lower cost of production.

Rationale:

• No confirmed pellet export deal was recorded and not considered for price calculation. It was given 0% weightage in the 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.
  
  

Market dynamics

• Iron ore spot prices up w-o-w: The benchmark iron ore fines index increased by $3/t w-o-w to $117/t CFR China on 30 April. The buying interest remained lowered as mills procured the material ahead of the Labour holidays in the last one week. The cargo arriving at the end of May has been restocked, but the purchasing process for June arrivals has not yet begun. Chinese port stock prices fell as spot market buying waned.
  
  
• DCE futures rise w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the September 2024 contract increased by RMB 25/t ($3/t) w-o-w to RMB 874 ($121/t) on 30 April. Prices remained stable d-o-d yesterday.
  
  
• Pellet inventories edge up: Pellet inventories at China's major ports inched up by 0.35 mnt to 7.5 mnt on 29 April compared to the last week, according to SteelHome data.
  
  

Nil exports from India

No volumes were exported from India in the fourth week of April. No pellet cargo was loaded from India in the last two weeks of April, as per vessel line-up data.

Outlook:

Based on BigMint's analysis, the pellet export market is expected to remain volatile after the Chinese Labour Day holidays as sellers are optimistic about the market.