Strong Chinese demand on strict environmental norms and absence of Samarco gave a big push to Indian pellet export volumes. India exported 9.68 MnT pellets in CY17 which was 5.79 MnT in CY16 and around 1 MnT the year previous.
In CY17, Jindal Steel & Power remained largest Indian pellet exporter at 1.98 MnT followed by BRPL ,Rashmi Metaliks. KIOCL and Essar Steel.
Why Indian pellet export volumes jumped in last couple of years?
1. Supplies from Samarco still remain suspended: The Samarco pellet plant with capacity of around 30 MnT per year, was suspended post a dam failure that occurred in November 2015. The date for resumption of operation at mines was expected to be around late 2018 or by early 2019 with reduced rate of operation at 19 MnT per year.
However, there seems to be a long way to reach to a conclusion for restart at mines owing to pending litigations and compensation packages which eventually may take much time for mine to resume.
2. Changing shifts of Chinese steel mills towards high grade: Steel mills in Northern Chinese province are blending around 70-75% of sinter feed and rest around 25-30% pellets and lumps which is direct charge material to furnace in the process of crude steel making. On the other hand, mills in southern China are using pellets/lump to the extent of 20-25%. China’s strict governmental laws and winter heating cuts led to rising demand for high grade ore and restocking by Chinese steel mills.
Indian pellet exports to China moved up from 5.05 MnT in CY16 to 8.24 MnT in CY17.
3. Increased demand of Indian pellet by non-Chinese market: The supply constraint in global market due to temporary shut by LKAB led increased preference for Indian pellets. Besides, Korean steel mills had increased their dependence on Indian mills for pellet demand on urgent need owing to some technical breakdown at their plant. Non-Chinese markets such as South Korea, Japan and Vietnam recorded sharp rise in.
How did it benefit Indian pellet makers?
Indian pellet export reference price assessment surged from monthly average of USD 107/MT, FoB India in Jan’18 to monthly average of USD 141/MT, FoB India in Sep’18. However high grade Indian origin pellets continued to fetch better premiums.
Spot pellet premium for Fe 65% grade pellets reached record high levels towards beginning of Sept’18 at USD 89.55/DMT, CFR China which was assessed at USD 42.5/DMT, CFR China in beginning of 2018.
Will the same momentum continue?
After observing strong demand from Chinese mills, Indian pellet export prices have dipped as mills are learned to have increased procuring iron ore fines and domestic concentrate since Oct’18 which led to sharp decline in bids for seaborne pellets.
However it will be interesting to see whether upcoming winter cuts and strict environmental norms in China will be able to keep sentiments in Indian pellet export market optimistic? When will Samarco resume operations and how will the trade dynamics change in 2019?
To get more insights on the Indian Iron Ore, participate in the 3rd Indian Iron ore and pellet Summit, 18-19th Feb 2019, Delhi NCR