India: Domestic pellet trade surges as demand picks up post-monsoon

• Sponge iron, finished steel prices recover
  
  
• Weak export demand boosts domestic trade
  
  

Pellet trade volumes in the Indian domestic market rose sharply by 76% m-o-m to 1.63 million tonnes (mnt) in September 2024, up from 923,000 tonnes (t) in August 2024, according to data maintained by BigMint. The increase in trade volumes reflects improved market sentiment, driven by higher raw material and finished steel prices amid growing demand following the end of the monsoon season.

Factors driving up domestic pellet trade volumes

• Rise in sponge prices: Sponge PDRI prices in Raipur rose by around INR 850/t ($10/t) m-o-m in September. In other regions, prices increased by around INR 180-800/t ($2-10/t) in the period under review. The surge in prices was primarily due to raw material shortages for sponge iron, coupled with a rise in demand for finished steel.
  
  
• Higher bids in OMC's fines auction: Odisha Mining Corporation (OMC) conducted an auction for 2.40 mnt of iron ore on 20 September 2024, in which 1.021 mnt of lumps and 1.377 mnt of fines were on offer. In total, around 2.398 mnt of iron ore were booked. The auction received a favourable response from steelmakers, with bids fetching a premium of INR 250-1,250/t ($3-15/t) against the set base prices, owing to the tight availability of high-grade ore following an extended monsoon.
  
  
• Fall in export demand: BigMint's India pellet (Fe 63%, 3% Al) export index dropped m-o-m to $50/t FOB East Coast in September 2024 as compared to $60/t FOB in August 2024. This decline was influenced by weak demand and high port inventories, coupled with poor steel mill margins in China. With demand showing minimal signs of recovery, Indian producers were left awaiting more favourable conditions to secure export deals. However, this sluggish export sentiment provided support to domestic trade.
  
  
• Hike in NMDC's prices: India's largest merchant iron ore mining company, NMDC, increased list prices of calibrated lump ore (CLO) and fines by INR 300/t ($4) and INR 400/t ($5), respectively, BigMint learnt from sources. The company's prices are effective from 01 October 2024. The miner fixed prices of DR CLO (10-40 mm, Fe 67%) at INR 6,720/t ($80/t) and of iron ore fines (-10 mm, Fe 64%) at INR 5,010/t ($60/t) on FOR basis from its Bacheli complex. Prices include royalty, DMF, and NMET charges.
  
  

M-o-m pellet trade comparison

Pellex overview

The monthly average of BigMint's domestic pellet index, PELLEX, was assessed at INR 8,760/t, down by INR 210/t m-o-m. This decline follows a reduction in pellet offers by Raipur-based producers, prompted by ongoing bid-offer disparities in the market throughout the month.

Outlook

Pellet trade volume is expected to remain volatile in the coming month as raw material like iron ore prices have increased sharply due to shortage and on the other hand sponge and finished steel prices are not picking up as expected therefore there will be uncertainty in the market.