Indian iron ore pellet export market overcame a brief mid-week nervousness over Chinese finished steel outlook and rebounded to record smart gains towards close of the week on reports of Indian government likely to set a floor export price for iron ore.
Market sources said that ex-India pellet price gained another $10/mt towards close of the week to $175-181/mt CFR China, with a number of industry players even forecasting a target price of above $200/mt in the short term, if the government announces any floor price for exports of iron ore in the coming weeks.
Higher supplies of raw materials to China in the coming months, particularly shipments from Brazil will fall short of expectations of the market as the Chinese steel market despite short term fluctuations will largely remain stable in the medium term on strong fundamentals.
In view of the possibility of the Indian government imposing a floor price for iron ore exports, merchant procurement of fines by local pellet producers will rise, but strong raw materials market in China will absorb higher ex-India prices with target price of $200/mt very much achievable, several market participants said.
Sources said that an Essel Mining affiliate pellet producer reportedly concluded a deal for around 30,000 mt for April delivery at price of around $180/mt CFR China for high grade material with alumina content of less than three percent.
Jindal Steel and Power Limited’s pellet producing plant reported a trade of around 40,000 mt for April-May delivery at a price of around $180-185/mt CFR China the sources said.
“Trading activity was impacted slightly and hence fewer trades owing to some negative sentiments among Chinese buyers. But futures contracts in raw materials still remained strong and outlook is very positive. Ex-India prices have bounced back and trades will improve after year end considerations are over after a fortnight,” a member of Pellet Manufacturers’ Association of India (PMAI) said.
“There is very limited downside risk. Of course pellet producers will have to adjust their pricing strategy once iron ore export floor price is announced by the government. But any resultant rise in pellet prices will be absorbed by buyers as Chinese steel restocking will remain stable,” he added.