Ex-India pellet prices have suffered severe setbacks, falling to the low level in six and a half months amid the ratcheting up of trade tensions between the US and China and, with a serious impact foreseen in the long term, local export-oriented producers are rethinking their strategies and are becoming more aggressive in developing domestic sales networks, SteelOrbis learned from trade and industry circles on Friday, April 11.
Sources said that ex-India pellet prices have fallen by about $9/mt to the range of $100-101/mt CFR China, but still no trades have been confirmed as bids received were $10-12/mt lower.
The sources said that the bid-offer gap was too wide to be bridged for any deals to be successful. Moreover, with ex-India prices falling to their lowest level in six and a half months, sales realisations from local sales have risen to about INR 2,400/mt ($28/mt), on ex-plant basis, and hence overseas sales have lost significant economic viability.
Several producers said that, while they were closely monitoring seaborne trade in raw materials, the current trend is expected to persist in the long term.
It was observed that, despite several uncertainties on the possible impacts of the US-China tariff war, it could be reasonably assumed that China will be saddled with surplus steel and the oversupply situation would dampen raw material demand with possibilities of further production cuts.
The robust domestic demand and price in India is offering a “safe haven” amid the crash in exports but export-oriented port-based pellet producers still face challenges in realigning their sales infrastructure.
“Several pellet producers have been focussing on local sales, offering higher margins for the past several months. However, with exports entering a possible long-term bearish phase, export-oriented pellet plants face challenges,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
“The port-based plants generally have owned or rented port stockyards to ensure faster deliveries for their export-oriented output. They will now have to re-strategize to serve users in the hinterland, idling their port-based stockyards, entailing costs and higher transportation charges,” he added.