Indian iron ore pellet prices are likely to remain well supported in the near term on the back of supply concerns and robust demand in China.
Electricity and logistics hurdles in India's key pellet-producing state of Odisha after it was hit by Cyclone Fani over the weekend will likely disrupt supplies over the next several days.
"Demand for pellet remains strong in China, despite substantial stocks of pellet in portside markets," the director of a Kolkata-based pellet trader said on the sidelines of the SGX Iron Ore Forum.
Iron ore pellet prices are likely to touch $128-130/dry metric tonne (dmt) by June, said a Beijing-based iron ore trader. A cargo of 64pc Jindal pellet was traded at $123/dmt on Wednesday, he said.
The Argus-assessed 64pc Fe, 3pc alumina pellet was assessed at $122/dmt on 7 May.
Lump prices have remained high at above a 30¢/dmtu premium to the 62pc fines index this year, making the use of imported pellet viable for Chinese mills.
Low-alumina pellet is more sought after than higher-alumina variants, leading some Indian producers to step up supplies of higher-Fe, lower-alumina (sub-3pc) pellet.
India's largest private-sector iron ore mining firm Essel Mining will start its 1mn t/yr pellet plant in Odisha by the end of this year, targeting the export market. The company is aiming for a Fe grade above 65pc and alumina below 2pc for its pellet, said Pavan Kakani, Essel Mining's vice-president of marketing.
Another Indian pellet producer Godawari Ispat, which currently produces 63-64pc Fe pellet with sub-3pc alumina content, aims to produce direct-reduced (DR)-grade pellet with a Fe grade of above 66pc and sub-2pc alumina content by July.
Low-alumina pellet exports are attracting buyers outside of China. State-controlled KIOCL, which produces low-alumina pellet, often using imported Brazilian or South African concentrate, has signed an initial agreement with Emirates Steel to supply 500,000-1mn t/yr pellet.
