China iron ore pellet: Demand, tight supply supports

Seaborne pellet prices rose this week on the back of stronger demand from China and fewer shipments out of India, a key seaborne supplier.

The Argus 64pc Fe, 3pc Al pellet was assessed at $108/dry metric tonne (dmt) this week, up by $3/dmt from last week. The 2pc Al price was assessed at $111/dmt. The premium between 2pc and 3pc Al pellet was flat from the previous week at $3/dmt.

Higher mill margins in China have encouraged steel producers to seek more direct-charge material to keep output rates at maximum levels. A combination of high profits and winter sintering restrictions across China may support pellet prices in the near term.

Pellet offers from India have dwindled amid tight availability of rail wagons to haul pellet to ports and increased demand from domestic mills. A large Indian pellet producer reported selling out of December cfr China cargoes and offering $110/dmt for January delivery cargoes.

"I have six enquiries this week from China for cargoes. I have not seen such a momentum in demand since October last year. But we do not have enough supplies to meet this demand," said an executive at another major Indian pellet producer.

Several deals were done during the assessment week. A cargo of BRPL Indian pellet with 1-5 December loading was sold at $108/dmt on 22 November. A cargo of Rashmi pellet with December delivery was sold at $107/dmt on the same day. Another deal for Indian pellet with December delivery was done at $109/dmt on 22 November.

A cargo of January delivery Rashmi pellet was heard at $110/dmt today. Cargoes of BRPL pellet with December loading were offered at $110/dmt and $110.50/dmt. An offer for a BRPL cargo was also heard at $108/dmt with a bid at $106/dmt.

Portside pellet prices rose at a slower pace than seaborne prices this week as portside stocks remained high. A cargo of 3pc Al Indian pellet was done at 885 yuan/wet metric tonne — a seaborne equivalent of $111/dmt — at Rizhao on 22 November. A cargo of KIOCL Indian pellet with 2pc Al was done at Yn915/wmt at Tangshan yesterday. BRPL pellet was offered at Yn930/wmt in Rizhao and Caofeidian today, while a JSPL cargo was offered at Yn910/wmt in Jingtang