Indian pellet market has observed a sharp price hike in last couple of weeks. Domestic pellet offers in Raipur (Central India) have touched nearly 8-month high to INR 7000/MT (basic, GST extra). This is up by INR 400/MT against last week`s assessment of INR 6,600/MT. Similarly in Durgapur (eastern India) pellet prices have moved up by INR 300-400/MT W-o-W and in Kandla (western India) by INR 150 /MT.
The increase in domestic pellet offers is on higher realization in exports.
Why a sharp surge in Indian pellet export offers ?
Improved demand from overseas buyers amid less seaborne pellet supply have supported price hike. Indian pellet export reference price assessment is hovering at 4 years high at around USD 122-123/MT, FoB India for regular grade.
The price hike is supported by enhanced buying interest from Chinese mills amidst newly announced production cuts. Besides, Japan, European and Korean still mills have also increased their dependence on Indian mills. Pellet supply had come down in global market after Swedish miner - LKAB (EU largest iron ore producer and 2nd largest producer in seaborne pellet market) declaring a force majeure.
How will it impact availability in domestic pellet market ?
As per SteelMint sources, few major pellet makers in Central India are not offering in the domestic market owing to sufficient export bookings and are expected to offers in limited quantities in merchant market for upcoming two months. The supply constraints by major miners are expected to bring about material scarcity in domestic market supporting further price rise.
As per the quarterly report, Godawari Power & Ispat which has pellet making capacity of 1.8 MnT recorded pellet sales of 0.35 MnT in Q1 FY19. The pellet maker is heard to have closed its domestic sales as of now.
Also Bajrang Power & Ispat which has pellet capacity of 1.4 MnT is heard not offering material in domestic market.
As per sources, few major pellet makers may offer less quantities in merchant market in next two months which is expected to limited availability in merchant market. Amid less availability, other pellet makers may raise offers.
How will it impact domestic iron ore market?
The supply constraints in domestic pellet market, supported by rising overseas demand is expected to push domestic iron ore prices in near future.
Market sources in conversation with SteelMint shared that they are expecting Odisha iron ore prices to increase shortly in both lump and fines. However few major merchant miners are heard giving quantity discounts of INR 400-500/MT on bulk purchases.
Also hike in domestic sponge iron & P-DRI prices are another factors which miners may consider while revising prices.