India’s Pellet Export To China Drops Over 50% In May 2023

China, the world’s largest Steel producer, has experienced a significant decline in Pellet imports from India. As China accounts for approximately 80%-90% of India’s overall Pellet exports, this sharp drop has raised concerns in the Indian Pellet industry.

In May 2023, India’s Pellet exports to China reported approximately a 60% decrease compared to April 2023. The export volume dropped from approximately 6.8 lakh tons in April to a significantly lower figure in May at around 3 lakh tons. This decline has raised eyebrows in the industry, given China’s dominant role in India’s Pellet export market.

Reasons Behind Decline

Pellet exports decline can be attributed to the following factors:

• Declined Global Iron Ore Prices- The global Iron Ore prices experienced a downward trend, impacting the competitiveness of Indian exporters in the international market. The price drop was driven by a global Steel price decrease and slow demand from China, one of the largest consumers and producers of Steel products. China’s diminished imports of Pellets played a significant role in this decline as the construction industry in the country has yet to fully rebound, resulting in lower Steel demand.

• Low Steel Production- China’s Steel production also saw a decline, with approximately 92.6 million tons of crude Steel produced in April 2023, a decrease of 1.5% compared to April 2022. The production figures for May 2023 are also expected to be lower as downstream demand in China continues to struggle.

Impact On India

Here’s the impact of low Pellets exports from India:

• Pellet Market- Pellet export decline is expected to continuously put pressure on the Indian Pellet market. The reduced demand from China and the overall industry sluggishness are likely to keep prices under pressure. Given the prevailing demand dynamics, a significant price recovery in the near term seems unlikely.

• Indian Exports- With China being a major buyer of India’s Pellets, the sharp decline in Chinese imports had a direct impact on India’s Pellet export volume. In May 2023, India reported a 31% decrease in Pellet exports, amounting to around 5 lakh tons, down from the around 7.5 lakh tons recorded in April 2023.

Positive Signs

On a positive note, the approaching monsoon season brings some hope for the Indian Pellet and Iron Ore industry. The increase in moisture and lower productivity during the monsoon can disrupt supply and increase Pellets consumption, particularly Sponge Iron production through rotary kilns. This could provide some support to the industry in the coming months.

Market Outlook

Considering the current sluggish global market trends, it is likely that China’s Steel production will be limited. This will have an impact on Indian raw material exports, particularly for Pellets. The ongoing challenges in the Chinese market and the broader global Steel industry may prolong the period of slower growth and hinder a sharp price recovery for Indian Pellet exporters, participants reported to OfBusiness.

OFB’s Insight

The significant drop in China’s Pellet imports from India has raised concerns in the Indian Pellet industry. Global Steel production declining trend and subdued demand from China are the key factors behind this decline. As the Indian Pellet market faces pressure and limited scope for price recovery, the industry will closely monitor market dynamics and hope for a boost from favourable factors such as the monsoon season.

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