After a setback early in the week, ex-India pellet prices have rebounded strongly to consolidate firmly above the $200/mt CFR mark in reaction to the beginning of the implementation of tighter production curbs on Chinese steel mills, spurring demand for pellets, and amid the surge in freight costs, SteelOrbis has learned from local trade and industry circles on Friday, March 12.
The sources said that, while a few stray deals were concluded early in the past week at around $200/mt CFR China amid fears of production cuts by Chinese steel mills, prices soon rebounded as such fears were offset by more blast furnaces shifting towards use of pellets and lowering sintering operations.
However, several local Indian pellet producers reported that much of the rise of ex-India pellet prices moving firmly above the $200/mt mark could be attributed to the sharp increase in shipping freight costs.
Citing an example, two pellet producers reported that Panamax vessels plying between the Indian east coast and China with a capacity of 50,000 mt per vessel and above had increased freight charges by as much as 20 percent on week-on-week basis, triggering a surge in ex-India pellet prices on CFR basis.
Sources said that, while one trade early in the week was reported at a price of around $200-206/mt CFR, prices staged a smart rebound to levels of $215-220/mt CFR as Chinese steel mills were reported to be shifting to higher-grade concentrates and pellets to reduce sintering and as shipping lines increased freight charges. This compared to trades concluded in the range of $201-206/mt CFR a week ago.
“Higher pellet prices are not necessarily yielding higher margins for exporters as much of the rise is for higher freight costs,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
“There is a lot of uncertainty over whether current high prices will be sustained as there is confusion in interpreting measures being taken regarding Chinese steel mills. Some reports indicate production cuts being imposed, which in the long term will lower raw material demand. On the contrary, some reports are forecasting more steel mills shifting to higher-volume use of concentrates and pellets as blast furnace feedstock and reducing sintering to adhere to stricter pollution control norms. The pellet export market will find a new balance depending on which forecast prevails,” he said.
Brahmani River Pellet Limited (BRPL) has reportedly concluded a trade of 40,000 mt of high grade pellet with alumina content of less than three percent at a price of $215-220/mt CFR China for May delivery.
Pellet producing plant of Jindal Steel and Power Limited (JSPL) has reported a trade for 50,000 mt at a price of around $220/mt CFR for end-of-April delivery, sources said.
An affiliate company of Essel Mining has concluded a trade for a 40,000 mt tonnage at a price of around $215/mt CFR for May delivery, the sources added.