Ex-India pellet prices have plunged sharply over the past week, bringing all trading activity to a halt as sentiments and the demand outlook worsened, with both buyers and sellers deserting the market, SteelOrbis learned from trade and industry circles.
Ex-India pellet prices have shed around $10/mt over the past week to $150-160/mt CFR China, but sellers have retreated without concluding any trades as reports spread of more Chinese steel mills to come under inspection, with the possible imposition of fresh production cuts and a further reduction in the demand outlook.
At the same time, Indian sellers have pulled back offers claiming that current pellet export realizations barely covered the cost of local iron ore fines and any export sales would entail negative margins.
Though no confirmation is available, the market is rife with speculation that receivables of at least two exporters for contracts concluded earlier were still stuck and that, while payment default is so far being ruled out, delayed payments against completed supply contracts have aggravated the nervousness in the market, prompting sellers to a pause in new transactions.
“The pellet export market has entered a long-term bear phase. The Chinese raw material market has entered a new phase of long-term low demand. Apart from overseas demand, pressures are mounting from the supply side as a lot of new pellet capacity has gone on stream with aggregate capacity touching 100 million mt. Domestic pellet consumption will not support such large volumes,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
“There is some demand emanating from west Asia including Iran. But not only is buying from this region for smaller tonnages, it is also very sporadic and will not offset the demand recession from China,” he added.