Bearish conditions facing Indian pellet exports have deepened, with prices suffering further setbacks amid a worsening outlook and poorer demand from China, falling sharply in tandem with lower prices of high grade lumps, SteelOrbis has learned from trade and industry circles on Friday, August 13.
Ex-India pellet prices have dropped by $10-15/mt over the past week to levels of $215-220/mt CFR China, with no trades heard in the market and buyers expecting a sub-$200/mt CFR price imminently, while sellers are in no position to conclude deals at the current lower levels that offer negative margins at the current high price of fines in the local market.
The sources said that, with a combination of Chinese steel output being kept at the previous year’s level at best and prices of high grade lumps softening, mills have been under no compulsion to restock pellet as raw material, as a higher price could increase blast furnace output.
“The outlook for demand for ex-India pellets is very grave. There is too much raw material -lumps, fines, concentrates and pellets - available in the market at a time when Chinese steel production will definitely not exceed the 2020 level. Low demand from mills combined with excess raw material supplies will continue to put pressure on prices,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
“Indian pellet producers are caught in a bind of high local prices of feedstock (iron ore fines) and weak export prices. Sellers cannot afford to adjust prices below the $200/mt mark which seems inevitable and so they have little option but to pull out of the market,” he said.
Sources said that ex-India pellet prices have dropped $25-30/mt over the past two weeks and, even though the pace of the increase in local prices of fines has eased, they are still up 5-10 percent since the first week of August for merchant deliveries from Odisha mines, making conversion margins of pellet plants negligible or negative, depending on the distance of the pellet plants from pitheads.