Divergent trends have emerged in Indian iron ore pellet export offers with lower grade pellets (alumina content of two percent and above) softening slightly, while higher grade pellet offers have been maintained at higher levels, SteelOrbis learned on Friday, December 6.
The traders said that one of the prime reasons for higher grade iron ore pellets export offers remaining at higher levels is the expected increase in demand for that grade of raw material among local steel mills amid apprehensions of a shortage emerging in the domestic iron ore market during the coming months and steel mills having little option but to shift to higher-priced pellets.
High grade iron ore pellet prices have remained firm in the range of $110-115/mt CFR China, while lower grade material has softened slightly by $2/mt during the past week to $101-103/mt CFR China.
The sources said that only Brahmani River Pellets Limited (BRPL) is reported to have concluded contracts for significant volumes. BRPL reported concluding two cargoes for late January delivery for high grade iron ore pellets at the higher end of the range at $115/mt CFR China, maintaining its sharp rise in shipments in November. The sources said that reports in the market indicated that BRPL had concluded contracts for a huge volume of 396,000 mt during November and has been able to maintain aggressive exports during December too.
“High grade iron ore pellets will continue to find support even amid a slight fall in buying by Chinese steel mills amid their lower production levels in the winter months, as Indian steel mills are expected to become active buyers of high grade pellets with the emerging shortage in domestic supplies of lumps,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
Indian iron ore production is expected to grow by seven percent during the 12-month period ending March 31, 2020 to 225 million mt. “But the steel industry is apprehending a supply disruption as 24 operational mining leases in Odisha and Karnataka states accounting for about 70 million mt per year production will expire on March 31, 2020, and expected delays in holding auctions of new mining leases may lead to supply disruptions and local steel mills have already started contracting for high grade pellets, particularly with producers in Chhattisgarh in central India as contingency raw material planning. This will provide sustained price support to pellet prices,” he added.