High volatility has hit the Indian pellet export market, with prices surging early in the week, but plunging sharply thereafter with virtually no trades concluded at higher levels following reports of fresh deep production cut plans likely to be imposed on Chinese steel mills, SteelOrbis learned from trade and industry sources on Friday, September 10.
Early in the week, ex-India pellet prices have surged to touch $200/mt CFR China, but this proved short-lived and no trades were concluded with prices plunging to $160-170/mt CFR as reports trickled in that more Chinese provinces will be hit by steel production cuts which could be as high as 50 percent, seriously denting the demand outlook, and with buyers retreating from the market. A week ago trades were reported in the range of $185-190/mt CFR.
“The demand outlook is very dismal. Restocking of raw materials has become redundant in the prevailing market conditions, particularly for higher-priced feedstocks like pellets and concentrates,” a member of the Pellet Manufacturing Association of India (PMAI) said.
“Pessimism has increased amid reports that the Chinese government is expected to do an assessment of production cut impacts during the April-August period and mills located in more provinces are to be brought under such production cuts from November. The raw material demand depression that was expected from January is likely to come early,” he added.
Pellet prices are also under supply-side pressures, industry sources said. They said that, since January 2021, total domestic pellet production capacity has increased to around 100 million mt per annum from around 80-90 million mt per annum. Even at the current capacity utilization of 70-80 percent, tapering Chinese demand will put huge pressure on exports to newer markets in the Gulf, and the EU is still very low in terms of volume.
Sources said that a pellet producing affiliate of Essel Mining concluded a trade for an estimated 30,000 mt at a price of around $160-165/mt CFR China.
A government operated pellet plant is heard to have concluded a deal for 40,000 mt at $150-160/mt CFR, sources said.