Iron ore pellet prices stable on tight India supply

Tight supply of iron ore pellet from India is keeping prices stable, despite slow demand from Chinese mills that are unwilling to accept offers at $120/dry metric tonne (dmt) for cfr China cargoes.

The Argus-assessed 64pc Fe, 3pc alumina pellet cfr China price was unchanged from last week at $118/dmt today. The price for 2pc alumina pellet was assessed at $123/dmt.

Argus launched coverage of the pellet market today with the two new indexes for imports of 64pc basis pellet into China.

Pellet demand in China is expected to increase in the long term on the back of mills switching to more emissions-friendly production processes involving larger blast furnaces that use more direct-charge material.

Pellet markets are expected to remain tight this year as disruptions to Brazilian mining firm Vale's output are keenly felt. Vale is the world's biggest producer of iron ore pellet. The pellet shortfall is being increasingly met through increased imports of Indian pellet by China, with India's export volumes expected to rise sharply this year. Most pellet from origins such as Brazil tends to be locked into long-term contracts, but Indian pellet trades largely on a spot basis into China, providing most of the liquidity to the spot pellet seaborne and portside markets.

New supplies of Indian pellet are tight, with only one vessel of 55,000t KIOCL pellet loading for export to Japan on 22 April, according to Indian shipping data. A shipment of 160,000t of Indian pellet was made to China on 17 April. Some Indian steel mills are looking to source pellet from Iran, with a 65pc basis Iranian cargo recently sold at $125/dmt cfr India's Kandla port.

A cargo of 64pc BRPL pellet cargo with late-April loading dates was offered at $120/dmt. A Shandong-based mill received an offer of 50,000t KIOCL pellet with 20-30 April loading dates at $122/dmt.

Major Chinese ports have ample pellet inventories, which may cap upside to prices in the near term. But prices may find support as the impact of the global supply crunch intensifies in the coming weeks.

Several Chinese mills are raising output of pellets at their own mills, as it is cheaper to process domestic pellet feed concentrate than to buy imported pellet.

An offer for 50,000t of 64pc Fe, 2pc alumina KIOCL pellet with 20-30 April loading dates was made at $122/dmt, while another KIOCL cargo was offered at $125/dmt. The price differential between the 3pc alumina and 2pc alumina cargoes has narrowed this week.

A 64pc Fe Indian pellet cargo was offered at 940 yuan/wet metric tonne (wmt) at Shandong port, translating to a seaborne equivalent of $120/dmt. A 64.64pc Jindal Steel pellet cargo was offered at Yn985/wmt at Jingtang port. No pellet deals were heard in the portside markets.