Ex-India pellet prices have suffered major setbacks amid reports of regulations on steel capacity and output in China, with both sellers and buyers retreating from the market, SteelOrbis learned from trade and industry circles on Friday, June 7.
Ex-India pellet prices have slumped by $10-13/mt to the range of $112-114/mt CFR China, with some reports indicating stray bids at even lower levels, but no deals have been confirmed amid the extreme nervousness among both buyers and sellers.
According to sources, following the latest slump in prices, margins for pellet exporters have moved into the negative zone and, with domestic sales still more profitable, producers have been shifting export allocations to local steel mills.
However, the shifting of volumes from exports to local sales is feasible for volumes at plants, but producers having built up port stocks for export following the recent surge in prices have been left in the lurch since channeling such port stocks to local mills entails additional logistical and transportation costs.
“We are hearing a lot of government intervention in checking steel mill capacity and output in China, triggering acute nervousness in the raw materials market. There is very limited interest in higher-priced pellets. In fact, current ex-India prices offer no profits for local pellet producers,” a member of the Pellet Manufacturers’ Association of India (PMAI) said.
“The bearish turn in the export market has prompted local pellet plants to drop local prices. But local prices are still offering a positive margin of around INR 500/mt ($6/mt) on ex-plant basis. This is lower than the INR 1,300/mt ($16/mt) margin from local sales last month. But lower domestic sales margins are still a better option than selling as a loss overseas,” he said.