A bearish trend has set into India’s iron ore pellet market with prices losing $10-12/mt as Chinese buyers have started retreating, sources said on Friday, January 29.
The sources said that buyers have largely been pulling out from the market owing to a combination of factors including a slight rise in raw material stocks at Chinese ports, lower than anticipated restocking in China ahead of the holiday, and apprehensions that the global finished steel market may be entering a period of oversupply, prompting Chinese steel mills to lower capacity utilization levels, hence negatively impacting raw material demand in the near and medium terms.
The sources said that buyers have been reluctant to accept higher-priced pellets due to weaker finished steel prices, which have been putting margin realizations under fresh strains, prompting finished steel producers to adopt stricter raw material inventory cost management and to reduce fresh bookings.
Ex-India pellet prices have weakened to $185-188/mt CFR China, versus $198-204/mt CFR last week, and previous bullish sentiments over prices breaching the $200/mt mark have completely dissipated and contrary sentiments even indicate further losses after the upcoming Chinese New Year holiday.
“With finished steel prices losing momentum, a new trend of preference is emerging in favour of lower-cost iron ore fines, the prices of which have lost ground compared to pellets for producers to protect their finished product realizations,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
“The usual high level of restocking ahead of the holidays also seems to have ended early this year. Possibly because mills reckon on higher utilizations of sufficient port stocks and prefer not to commit fresh funds into new supply contracts. Deals in the local market are also falling as Indian pellet producers are hamstrung in adjusting offers to push volumes because of shortage of fines available for merchant miners,” he said.
Sources said that Rashmi Group has concluded a trade of an estimated tonnage of 30,000 mt at a price of around $185/mt CFR China.
An Essel Mining pellet producing affiliate has reported a trade for around 40,000 mt at a price of $187-189/mt CFR China for high grade pellets of alumina content less than three percent, the sources said.