Indian iron ore pellet export prices have tumbled during the past week amid aggravated pessimism over demand in the coming months amid rising concerns over steel production cuts in China and a rapid shift to lower grade fines from costlier direct-charge concentrate and pellets, prompting Indian sellers to retreat from the export market, SteelOrbis has learned from trade and industry circles.
Ex-India pellet prices have lost ground at a faster pace for the second consecutive week with prices down $15-20/mt to $225-235/mt CFR China, with some buyers submitting bids as low as $190-200/mt CFR, forcing sellers to pull out of the export market.
The sources said that reports received from buyers indicate that, even in the best-case scenario, Chinese steel mills, in view of government directives, will not let steel production in the current year exceed the previous year’s levels by much.
With increasing steel production in the current year now completely ruled out, Chinese blast furnaces are under no compulsion to spend more on costlier direct-charge concentrate and pellets and are instead rapidly shifting to lower grade and cheaper iron ore fines, triggering a sharp decline in interest in imported pellets.
“No deals have been reported during the entire week. Local exporters are in no position to adjust offers as current export prices do not cover raw material costs since local iron ore fines available from merchant miners are still rising,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
“Current prices are also not near a bottom since pressures on pellet prices are expected to mount as no Chinese steel mill is expected to increase production. In fact, the situation can worsen further and may force local pellet producers to lower plant output. If a lack of export trade persists, pellet plants will have to reduce plant output to levels of not more than 50 percent from the current levels of 80 percent. Local mills are not in a position to absorb volumes rendered excess from a lack of overseas shipments,” he added.