Chinese demand positive for Indian pellet manufacturers: Icra

Healthy demand from the steel industry and strong exports demand, especially from China, is likely to benefit the Indian pellet makers, according to a report.

"Domestic pellet makers are expected to benefit from robust domestic and Chinese demand. Given the significant share of low grade iron ore fines in India's total iron ore production, there is a growing need to beneficiate inferior grade ore and feed its output to pelletisation plants, to make the ore usable in steelmaking," Icra senior vice-president and group head, corporate sector ratings, Jayanta Roy said quoting a report.

The Icra report said China remained India's preferred pellet export destination with a share of 81 per cent in FY18.

After an unfavourable export environment prior to FY17, improved iron ore availability in FY17 and healthy import demand from China have led to a sharp rise in Indian pellet exports to 8.8 million tonne in FY17 from a negligible 0.7 million tonne in the previous year. Pellet exports grew further by 6 per cent in FY18, it added.

"Given the Chinese government's intent to curtail production of polluting industries, including sinter plants in steel mills, its procurement of higher grade iron ore (including pellets) has been on the rise," Roy said.

This in addition to its increasing steel production levels is likely to support international pellet prices in the near-to-medium term, he added.

"There could be a temporary moderation in pellet prices during the winter months in China (November to March) when the steel production is likely to be curtailed to contain pollution. However, China's recently announced stimulus to prop up infrastructure demand is likely to aid steel production growth, which in turn is likely to keep pellet prices buoyant," he said.