Ex-India pellet prices have suffered major setbacks over the past week from uncertainties in China, with the spiralling downtrend prompting most sellers to vacate the export market, SteelOrbis learned from trade and industry circles on Friday, March 7.
Sources said that ex-India pellet offers are down $6/mt to the range of 108-109/mt CFR China but, with even the few buyers left active in the market seeking $105/mt CFR, no deals have been reported in the market over the past few days.
Sentiments and trade activity took a big hit following the policy directions announced by China’s top bodies and given the declines in iron ore futures prices.
The losses suffered by ex-India pellet prices were because of the sudden cautious stance adopted by buyers following developments in China, and the pause in trade activity was a time-out being taken to assess the situation going forward, sources said.
It was pointed out by a section of local industry that China has announced that its huge steel industry will restructure and address issues of overcapacity, while rumours of effective production cuts were largely exaggerated, but, even then, their impact on raw materials including iron ore and pellets will not be insignificant.
However, another section of the local Indian industry maintains a contrarian longer-term view perceiving silver linings in the restructuring of the steel industry in China and a possible salutary impact on raw material demand.
At the same time, an industry restructuring, output cuts and the resultant balancing of demand-supply holds potential for improved operating margins of steel mills. Consequently, improved operational economics could also lead mills to increasingly look at higher grade and higher-priced raw materials like pellets.
However, in the immediate term, the sharp fall in ex-India pellet prices has widened the differential between export and local sales realisations. On Odisha ex-plant basis, local sales realisations exceed exports by INR 1,550/mt ($18/mt).
“Buyers will continue to remain cautious as they assess the structural changes in the steel industry in China and projected changes in raw material demand. There is still some downside to ex-India prices going forward,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
“If there are no positives from China in the coming week, workable prices for buyers can fall further to $100-103/mt CFR, but I do not think that will be acceptable in India. Locally pellet demand and prices are likely to remain stable. Pellet producers will need to divert larger stocks from ports to hinterland to increase deliveries to domestic mills,” he said.