China iron ore pellet: Price falls slow

Iron ore pellet prices slowed their falls this week as sellers with significant losses resist aggressive price cuts to attract demand.

The Argus 64pc Fe, 3pc Al pellet was assessed at $114.50/dry metric tonne (dmt) this week, down by $1.50/dmt from last week. The price has fallen by $15.50/dmt from $135/dmt on 30 July.

The 2pc Al variant was assessed at $116.50/dmt, down by $2/dmt from a week ago. The differential between 2pc and 3pc Al pellet narrowed to $2/dmt

An unconfirmed deal of Indian pellet was sold on 16 August from India to Malaysia at $112/dmt cfr Malaysia, which is equal to $114.50/dmt cfr China based on the freight differential. A cargo of BRPL with August laycan was offered at $119/dmt today, with a bid at $113-114/dmt. Another cargo of Indian pellet with 64pc Fe and 3pc Al was offered at $117.50/dmt today.

Sellers that bought at much higher prices levels are facing a dilemma, with losses of around $20/dmt if bought in July. They would normally be reluctant to cut the price too much in an attempt to recover as much of costs as possible. Some may land the seaborne cargo and sell in portside markets slowly, especially with portside prices higher than seaborne levels.

Indian pellet sold at 960 yuan/wet metric tonne (wmt) in Jingtang and Tangshan ports yesterday, equal to around $120/dmt cfr basis assuming 3pc water and 13pc value-added tax. But more arrivals and landing of pellet at the ports is making sales much slower, while sellers face a long holding period to clear stocks if they land cargoes.

The seaborne price drop of lump has also dampened sentiment for imported pellet. PBL was done at Yn805/wmt at Shandong port, while Indian pellet is selling at more than Yn150/wmt higher than lump, shifting interest to lower cost lump.

Lump demand has not improved much, even with its lower price, because of ample supplies. Australian lump deliveries increased this month, while some mills are offering combination cargoes of PBF and PBL.

The Argus 62pc iron ore lump premium fell by 1.2¢/dmt unit (dmtu) to 14.60¢/dmtu today.