Indian iron ore pellet prices have fallen by around 7.5pc so far this month to around $125/dry metric tonne (dmt) cfr China, hit by a drop in demand in the wake of less stringent environmental restrictions imposed on mills.
An unconfirmed deal for 64pc Fe Indian pellet with 3pc alumina was done at $125/dmt cfr China last week, down by $10/dmt from an early November deal at $135/dmt cfr China for 3pc alumina 64pc Fe Indian pellet.
China's environmental curbs on sintering and steelmaking sent pellet prices to a multi-year high of $150-155/dmt cfr China in August and September. But Beijing has loosened restrictions this winter to take into account installed pollution controls, allowing mills to rely less on direct-charge ores such as pellet. Mills also face narrowing profit margins.
"The decline in pellet prices is normal because the prices were too high earlier. Mills' margins have fallen, leading them to cut usage of high-priced ores," a Shanghai-based trader said.
Pellet prices fell to $139.50/dmt fob India for 63pc in late October from $148/dmt fob India in mid-September. The Argus ICX 62pc fines price rose from around $65/dmt cfr Qingdao in early September to as high as $77.80/dmt last week.
A cargo of 64pc Indian pellet with 3pc alumina loading from late November to early December was offered at $127/dmt yesterday. The tradeable level could only be $123-125/dmt, the Shanghai trader said.
Pellet feed follows
The premium for imported concentrate used as pellet feed is also declining. There were unconfirmed tender results for Karara concentrate at a $1.50-1.80/dmt premium to 65pc index late last week for 8-12 cargoes loading in December.
"The premium for imported concentrate has come down fast, as November-delivered Karara concentrate was awarded at a premium of $4.20/t in early October," an east China trader said. "I think mills' margin declines are the main reason for the drop in imported concentrate prices."
This is echoed in the narrower price differential between the 62pc and 65pc indexes. Demand for 65pc-indexed ores has weakened, while demand has increased for 62pc-index ores, he said.
The 62pc/65pc price differential narrowed to $20.75/dmt yesterday from $22/dmt in early November and $26.25/dmt in mid-October. "The price differential of 65pc and 62pc indexes may narrow further, when mills start increasing the use of lower-priced medium and low grades in the blast furnace to cut costs to cope with dwindling mill margins," a Beijing-based trader said.
Demand for IOCJ fines has been weak at ports, while floating basis IOCJ premiums have fallen to around 50-70¢/dmt from $1/dmt earlier this month, the trader said.
Environmental restrictions on pelletising plants have also reduced demand for pellet feed, another Beijing trader said.
