Sentiments in Indian pellet market improve due to pick-up in buying, Vale output target cut

Friday, 04 October 2019 11:41:09 (GMT+3)   |   Kolkata

Sentiments in the Indian iron ore pellet market have improved in early October as Chinese customers increased their purchases before their long holiday and it is expected that demand will stay firm in the near future. Moreover, Brazilian miner Vale announced a reduction of its pellet production forecast for this year.

Indian offers are in the range of $105-108/mt CFR China, compared to $104-106/mt CFR China in late September.

Market sources said that Rashmi Group has concluded a deal for a consignment for end-October delivery at $108/mt CFR with alumina content of less than two percent. Furthermore, Brahmani River Pellets Limited (BRPL) has reported an export contract with a Chinese buyer at $105/mt CFR China with alumina content higher than two percent for early November delivery. “The market showed positive signs with a rise in buying interest. One of the possible reasons for the rise in buy0ing interest is that Chinese steel mills were re-stocking raw materials for the coming winter season, as happens most years,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.

“Concerns over supplies tightening during the coming winter months also led to higher interest in Indian iron ore pellets, providing support to export offers,” the PMAI member added.

Vale has reported that its production of iron ore pellets will be 43 million mt in 2019, which is 2 million mt lower compared to its previous forecast. In the middle of the year, the miner had expected 60 million mt of pellet output, but has had to cut its target. This means that shipments of pellets from Brazil will not increase up to the end of this calendar year.

However, the uptrend in the pellet market will bring a greater number of Indian exporters into business, putting downside pressures on prices. During the August-September period, most of the iron ore pellet export contracts were concluded by pellet producers located in the eastern state of Odisha and they enjoyed the benefits of their plants being closer to ports at Paradip and Odisha.

Pellet producers located in central Indian province of Chhattisgarh have been largely absent from the export market considering their distance from ports. However, these producers are expected to return to exports if offers remain on an uptrend, which would offset their higher logistical costs and distance from ports, the traders added.

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