India: BigMint's India pellet export index up $7/t w-o-w; market witnesses fresh momentum

• Iron ore spot, futures up sharply
  
  
• A few pellet export deals under negotiation
  
  
• China policy support may boost India's export market
  
  

BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) increased by $7/tonne (t) w-o-w to $103/t on 17 April, 2024. No deals were heard in this publishing window; however after spot prices increased a few deals are under negotiation now and may conclude in the coming days.

Pellet offers in the seaborne market increased following the uptick in iron ore spot and futures prices in the last one week. As per sources, today's spot prices also increased sharply by $6/t d-o-d. With increased policy support, the Chinese stock market surged by over 2%, providing additional momentum to the steel sector. As a result, steel futures rose by another 2%, reaching a one-month high.

A trader said, "Export prices have improved but still are not feasible for concluding transactions. The recent improvement in Chinese finished steel sales and mill margins have kept the market supported. However, China's steelmakers are looking for cheaper materials to maintain their margins."

According to sources, some eastern India-based pellet players have floated export tenders and are eyeing price levels of $122-123/t CFR China. While others are expecting a $10/t increase in current prices. Although prices seen this week have raised market confidence, exporters may have to offer some concessions to close deals.

An eastern India-based pellet-maker said: "We have received a few enquiries for pellets on the IODEX index at a higher premium. While offers have improved in the last few days, domestic prices have also increased. The sudden improvement in steel prices has supported the demand for pellets, and selling pellets in the domestic market is more profitable than exporting right now. We are waiting for decent prices to conclude a deal in the overseas market."

Notably, domestic pellet prices increased up to INR 600/t in the domestic market amid improvement in sentiment and steel offers.

On the other hand, Chinese sources said that portside offers of Indian pellets (Fe 63.5%) increased by around RMB 75/t ($10/t) w-o-w on 17 April. Offers were recorded at around RMB 1,005/t at ($139/t) Qingdao, inclusive of all import taxes and port charges.

According to a market analyst based in Singapore, the Chinese market has undergone some notable changes due to improved market fundamentals. However, market liquidity has remained low, and some steel manufacturers are attempting to purchase raw materials at lower prices.

Rationale:

• No pellet export deal was recorded but not considered for price calculation. It was given nil weightage in the 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.
  
  

Market dynamics

• Iron ore spot prices up w-o-w: The benchmark iron ore fines index increased $2/t w-o-w to $110 /t CFR China on 16 April. Seaborne iron ore prices rose amid improved production margins and expectation of more spot cargo procurement by steel mills in the near term, followed by an uptick in finished steel sales.
  
  
• Pellet export realisation increases w-o-w : Domestic realisations are higher by INR 1,000/t ($12/t) compared to exports. In the local markets, pellet (Fe 63%) prices rose by INR 500/t ($6/t) w-o-w to INR 8,000/t exw ($96/t) in Barbil, eastern India. BigMint's pellet export ex-plant price realisation for Barbil increased by INR 600/t ($8/t) to INR 7,000/t exw ($84/t) this week.
  
  
• DCE futures rise w-o-w: Iron ore futures on the Dalian Commodity Exchange (DCE) for the September 2024 contract increased by RMB 56.5/t ($8/t) w-o-w to RMB 870 ($120/t) on 17 April. The prices sharply rose by RMB 44/t ($6/t) on a d-o-d basis.
  
  
• Pellet inventories at Chinese ports stable: Pellet inventories at China's major ports inched up by 0.1 mnt to 7.6 mnt on 11 April compared to the last week, according to SteelHome data.
  
  

Total pellet volumes exported from India were recorded at around 59,550 t in the second week of April compared to 137,250 t in the first week of April, as per vessel line-up data.

Outlook:

Based on BigMint's analysis, the pellet export market is expected to stay stable in the coming days buoyed by the increase in Chinese domestic prices. Additionally, policy support from the Chinese government may contribute to maintaining a positive market outlook in the near term.