Indian iron ore pellet exporters have pushed up prices in view of rising local prices of fines evoking a mixed reaction among buyers, SteelOrbis learned from trade and industry circles on Friday, July 9.
Sources said that pellet exporters increased prices by $15-20/mt to levels of $242-260/mt CFR, aiming to push up prices to levels of $300-310/mt CFR China, to maintain positive margin realizations against the backdrop of a surge in local prices of fines and unavailability of sufficient volumes to optimally operate pellet plant capacities.
It was pointed out that iron ore fines merchant sale prices in Odisha, where most pellet plants are located, are at levels of INR 9,000-11,000/mt ($121-148/mt) ex-pithead and, factoring in transportation and logistics costs, current pellet export realizations are marginal and even negative for some producers, forcing the latter to stay out of the market.
“The spread between raw material costs and export prices inclusive of logistic costs as things stand now is not more than $100/mt, which offers nominal returns after factoring in conversion and fixed costs of plant operations. Most pellet producers have reduced capacity utilizations either because of shortages of fines availability or unviable export realizations,” an Odisha-based pellet plant operator said.
“Sellers are testing the export market by pushing up prices. Reports of production cuts by Chinese steel mills can drive prices in either direction,” he added.
Several eastern India-based pellet producers have maintained divergent outlooks on prices. A section maintained that production cuts by steel mills in China coupled with higher volume supplies coming in from Brazil would rein in raw material prices.
However, another section of the industry held that steel production cuts in China would largely come from sintering restrictions of blast furnaces, which would limit demand for fines and shift feedstock preferences towards pellets, triggering a demand-driven price push for ex-India pellets.
Sources said that among the limited trades concluded during the past week, the pellet producing arm of Essel Mining reports a trade of around 35,000 mt at a price of around $245-255/mt CFR with a China-based trading firm.
A pellet plant of an Odisha-based steel mill reported a trade of around 40,000 with a Singapore-based trader at a price of around $255-260/mt CFR for high grade pellet with alumina content less than three percent, the sources said.