Indian iron ore pellet offers weakened during the past week and deals were limited by falling demand from Chinese steel mills. According to traders, there was a muted response to offers submitted by local pellet exporters as most Chinese mills were already operating at a maximum ratio of pellets to lumps for their blast furnace operations. At the same time, expectations of possible relaxations of winter steel production in China have triggered lower interest in imported pellets and an increase in use of high grade lumps.
Market sources said that most Indian iron ore pellet exporters lowered offers by around $5/mt during the past week to the range of $103-105/mt CFR China. Offers of higher grade iron ore pellets with alumina content less than two percent also weakened, by $5/mt to $110/mt CFR China, but only a very few deals were concluded during the past week for low-volume shipments.
Brahmani River Pellets Limited (BRPL) has concluded a deal for December delivery at $103/mt CFR China.
“Reports received in India indicate that China might maintain the same level of steel production restrictions as last year and not impose higher levels of production cuts. At the same time, other factors limiting pellet usage by Chinese steel mills have also come into play, leading to a softening of demand,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
The PMAI member said that several Chinese steel mills have reached a maximum ratio of pellet feedstock for their blast furnaces and hence have increased use high grade iron ore lumps to charge blast furnaces. At the same time, the fall in coking coal prices has also contributed to the use of higher volumes of lumps without impacting productivity and costs.
A section of market has maintained that Indian iron ore pellet export offers are expected to come under increased supply-side pressures at a time when Chinese demand is slackening, with pellet exports being permitted from the southern Indian state of Karnataka.
The Karnataka government had banned iron ore pellet exports in 2010, which was approved by India’s Supreme Court in 2011.
The ban of pellet exports from producers in Karnataka is expected to be lifted any time now with the Supreme Court slated to pass a verdict lifting the ban. The Karnataka government has already approved resumption of iron ore pellet production based in Karnataka, and this is to be vetted by the Supreme Court.
It is estimated that, with Karnataka pellet plants resuming production, exportable volumes will increase by about 6 million mt year and the additional supply could put pressure on export offers unless there is demand revival from Chinese steel mills, the sources said.