India: Domestic mill scale prices plunge on declining pellet prices

Domestic mill scale prices were assessed at INR 3,600/t exw-Raipur, a decrease of INR 3,800/t w-o-w. Deals of around 1,000 t were concluded at INR 3,500/t exw-Raipur.

The current assessment for mill scale (Fe 70/68%) stands at INR 4,750/t DAP Kandla, down INR 3,150/t w-o-w. No deals were heard concluded this week.

However, a few major pellet manufacturers are not purchasing mill scale from the market as they are uncertain of the recovery in pellet prices, going ahead.

Why did mill scale prices drop?

• Domestic mill scale prices decreased further owing to the drop in pellet prices. SteelMint's bi-weekly domestic pellet (Fe 63%) index, PELLEX, stood at INR 8,750/tonne (t) DAP Raipur on 27 May 2022, down by around INR 250/t compared to the last assessment on 24 May'22.
  
  

Offers and price indications in Durgapur have fallen by INR 250/t compared to the beginning of this week. Most of the sellers and buyers across regions preferred to remain silent.

• Merchant pellet producers have been worst hit. The Indian government recently imposed a steep 45% export duty on iron ore pellets from nil previously with the objective to control inflation and soaring steel prices and to ensure higher availability of the material in the domestic industry. Pellet production in FY2021-22 (FY2022) was around 77 mnt. The industry's capacity utilization level is 70%. On average, out of the total production, 66 mnt is domestically consumed, which leaves 11 mnt for exports. India's total pellet production is expected to increase in FY2023 on the back of ramp-up in capacities and an expected rise in iron ore production. However, the share of merchant pellet production (estimated at around 30-33 mnt) is likely to come down by 10-15% y-o-y.