Ex-Indian pellet prices have hardened further this week on the back of improved sentiments even though actual trades have continued to be on the lower side, SteelOrbis learned from trade and industry circles on Friday, June 9.
Ex-India pellet prices have moved up $10/mt to the range of $120-125/mt CFR China more due to better sentiment and a positive outlook as the demand situation did not show much fundamental change over the course of the week.
Sources said that, on the supply side, with the monsoon rains just a few weeks away, aggregate pellet production is expected to fall as the challenges of transporting iron ore fines from pitheads to plants increases.
On the demand side, industry circles have observed that there have been no indications of mills in China increasing outputs in the short term and hence raw material consumption is unlikely to rise either. However, a section of market participants did not rule out higher speculative activity in futures, pushing up pellet prices in the near term, although a definitive forecast is considered to be “risky”.
A government-run pellet producer has floated an export tender for 50,000 mt to close early next week and the bids received will set the overall mood of the local market.
A pellet producing arm of an Odisha-based integrated steel mill has reported a booking for 30,000 mt at $122/mt CFR China, while another Odisha-based pellet plant has concluded a trade for 35,000 mt at $120/mt CFR, sources said.
“The rise in ex-India pellet prices is a positive. But its sustainability will be determined by whether it is driven by fundamentals of rising demand for raw materials or speculative futures contracts. Sellers will have to wait for a week or so to get a clear picture,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
“The rise in price has narrowed the gap between export and domestic sales realizations, which now averages at INR 1,400/mt ($17/mt) on ex-plant basis, with domestic margins still higher compared to exports. So, ex-India prices need to consolidate further for sellers to increase the volumes on offer,” he said.