Indian iron-ore exports shifting from fines to pellets

23 july 2018

Indian international trade in iron-ore is shifting to more iron-ore pellets, rather than high-grade fines, prompted by changing preferences of overseas buyers.

Information and data sourced from industry indicate that overseas shipment and sales realisations of iron-ore pellets are outstripping trade in high-grade iron-ore fines (ferrous content 63.5% and above), the traditional exports of the raw material so far.

According to iron-ore traders, high-grade iron-ore fines are falling out of favour with buyers, particularly the ones representing Chinese steel mills, which are under pressure to cut polluting emissions and are said to be preferring to even pay a premium on high-grade Brazilian lumps and to be cutting down volume bookings for high grade Indian iron-ore fines with high alumina content.

The shift in buyers’ preferences is reflected in lower volumes of iron-ore fines exports from the country, which has been estimated at 24-million tons in 2017/18, down from levels of 90-million tons to 100-million tons a decade ago.

In sharp contrast, India with a total aggregate iron-ore pellet making installed capacity of about 90-million tons a year, produced about 48-million tons of the value-added raw material and shipping an estimated 80% of the production overseas last year.

The sharp rise in price differentials between Indian iron-ore pellets and fines has also contributed to higher shipments of the former. In the eastern province of Odisha, the largest iron-ore producer in the country, iron-ore pellet export prices currently averaged around $91/t free-on-board, and traders said that low alumina content pellets commanded a premium of 3% to 5%.

In contrast, the high-grade iron-ore fines export price, early this week, ranged between $63/t to $65/t CFR China, the traders said.

It was pointed out that while iron-ore fines exports attracted a tax of 30%, the rate was nil in the case of iron-ore pellet exports, another contributing element for local traders and manufacturers to push higher pellet volumes overseas.

According to the Pellet Manufacturers’ Association of India (PMAI), the shift in buyers’ preference to pellets rather than fines will enable standalone pellet making plants to increase their capacity usage from the current 50%.

However, the association maintained that the quantum of increase in capacity utilisation and meeting the emerging demand for Indian pellets in international markets, would largely depend on pellet plants getting higher volume access to domestic iron-ore fines supplies.

To be able to meet rising global demand, pellet manufacturers have sought a complete ban on iron-ore fines exports so that higher volumes could be made available for domestic value addition, with PMAI pointing out that there was a glut of iron-ore fines in the country as domestic steel mills were not technically equipped to feed fines into their blast furnaces.

Source: CREAMER’S MEDIA MINING WEEKLY