Indian pellet export prices have crashed over the past week and trades with China have dried up completely. Local pellet producers have started looking at newer markets, expecting the current slump in exports to China to become a longer-term trend, SteelOrbis has learned from trade and industry circles on Friday, August 20.
Ex-India pellet prices have suffered their biggest setback since early 2020, losing $30/mt over the past week to $185-190/mt CFR China, but trading activity was heard to be almost nil as sellers have been unwilling to conclude trades at such a low level, while buyers have been cautious too.
According to sources, Chinese buyers have not been interested in pellet deals even at lower levels as there is a lot of stock of iron ore in the local market and prices are at a heavy discount and mills are under no compulsion to rely on imported pellets.
Expecting the crash in the pellet export market to develop into a longer-term bearish market, Indian pellet producers are reported to have actively started developing alternative destinations in Europe and the Middle East, sources said.
While these were still early days to assess the pellet export potential in these regions, the sources said that at least two deals were concluded by an Odisha-based pellet producer over the past week, with the EU-based buyers ensuring slightly higher price realizations of around $200-220/mt CFR. Details on the volumes in these deals were not available and sources said that they were “modest” but the deals themselves indicated an optimistic outlook on opportunities.
State-run pellet producer KIOCL Limited was heard to have closed an export tender for around 55,000 mt with a Middle East-based buyer at a price of $195/mt FOB.
“There is a deep pessimism over pellet exports to China. Concerns are that periodic dips in prices are worsening with the market entering a long-term bear phase as Chinese steel mills are unlikely to revert to high-cost feedstock when there is a lot of lower-priced lumps and fines available,” a member of the Pellet Manufacturer Association of India (PMAI) said.
“In view of production cuts, we do not see pellet demand rising in China. Demand will either stagnate or show negative growth. With China as a long term destination not seeming to remain an option, local producers are stepping up efforts to develop alternative markets in the EU and Middle East, but the process will be slow and initial volumes low,” he added.