India: BigMint records around 7 mnt of merchant pellet deals in FY'24

Pellet trade volumes in India's domestic merchant market were recorded at 6.79 million tonnes (mnt) in the fiscal year 2023-2024. Trade volumes in key regions like Raipur, Bellary and Kandla were reported at 1.7 mnt, 1.42 mnt and 0.98 mnt in FY'24, respectively.

Key Highlights in FY'24

• Rise in pellet prices: In the domestic market, pellet prices saw an increase during FY'24, with key markets experiencing a rise of up to 25% y-o-y. The surge in domestic iron ore prices coupled with increased pellet production and capacity has contributed in upward pellet prices and sales. At the same time, the rise in pellet export prices and uptick in export trade volume have contributed to the growth of domestic pellet prices. As per, BigMint's domestic pellet (Fe 63%) monthly average pellet prices in Raipur increased by 3% in FY'24 to INR 9,500/t DAP ($114/t) as compared to INR 9,250/t ($111/t) in FY'23.
  
  
• Increase in Odisha iron ore prices: The monthly average of Odisha Fe 62% fines index showed a significant increase of 18% y-o-y in FY24, reaching INR 5,150/t ex-mines compared to INR 4,350/t in the previous year. Notably, in FY24, OMC, the leading merchant miner in India, managed to sell 17.6 mnt of fines out of the 19.86 mnt offered for the sale while only 6.27 mnt were booked in FY23 out of the 12.48 mnt quantity offered in their monthly auction.
  
  
• Improved pellet demand from sponge players: India's sponge iron production rose to over 50 mnt in FY24 versus 44 mnt in FY23. Pellets remained a preference over lumps owing to lesser delivery time, and improved availability amidst higher pellet production. The PDRI prices in Raipur fell by INR 4,500/t y-o-y to INR 28,000/t in FY'24 as compared to INR 32,500/t in FY'23 while in the majority of regions, prices dipped by INR 3,850-4,650/t y-o-y in FY'24. Prices decreased in this fiscal year because buyers preferred to procure at lower offers while demand for finished steel also weighed on sponge prices.
  
  

Why pellet trades surged?

• Pellet production increases 8% in FY'24: Pellet production capacity in India in FY'24 rose by 5% y-o-y to 140 mnt. Meanwhile, the pellet production is estimated to hike by 8% y-o-y to 90 mnt in FY'24 as against 84 mnt in FY'23.
  
  
• India's crude steel production up 13% in FY'24: India's crude steel production increased by around 13% to 143 million tonnes (mnt) in financial year 2023-24 (FY'24) from 127 mnt seen in the previous fiscal (FY'23).
  
  

However, trade volume sharply dipped by 51% m-o-m to 315,000 t in Mar'24 as compared to 645,000 t in Feb'24. The market was slowed in March as buyers had reluctant to buy towards the end of fiscal year.

Outlook: Total domestic pellet trade volumes are expected to remain firm following steel capacity additions, and the 10% growth in domestic iron ore production, as projected by BigMint. Though the overseas market dropped at the very beginning of new financial year but may improve with the new economic boost injecting China recently.