India: Domestic pellet trade volumes drop 12% m-o-m in Aug'24 amid sluggish market sentiments

• Sponge iron, finished steel prices down
  
  
• Export demand falls on tighter margins
  
  
• PELLEX declines by INR 200/t m-o-m
  
  

Pellet trade volumes in the Indian domestic market fell 12% m-o-m to 923,000 tonnes (t) in August 2024 compared to 1.05 million tonnes (mnt) in July 2024, according to data maintained with BigMint. Prices also witnessed a downward trajectory in all key markets, in the range of INR 100-700/t, amid a continuous decline in sponge iron and finished steel prices, which weighed on domestic pellet trades.

Factors driving down domestic pellet trade volumes

• Decline in sponge prices: Sponge PDRI prices in Raipur fell INR 930/t m-o-m in August to INR 24,670/t, and in other regions, offers dipped by INR 150-900/t m-o-m. Buying was subdued, limited to only essential needs. Additionally, finished steel prices declined, and weak sentiments in the sector exerted downward pressure on sponge iron offers.
  
  
• Lower bids in OMC's fines auction: Odisha Mining Corporation (OMC) conducted an auction for 2.59 million tonnes (mnt) of iron ore on 20 August 2024, of which 1.068 mnt were lumps and 1.515 mnt fines. In total, 2.58 mnt of iron ore were booked by buyers. While fines received a sluggish response, owing to a drop in pellet and fall in global iron ore prices, lumps generated active bidding at the auction.
  
  
• Fall in export demand: BigMint's India pellet (Fe 63%, 3% Al) export (FOB east coast) index dropped m-o-m to $92/t in August 2024 as compared to $97/t in July 2024 as Chinese buyers grappled with lower steel margins. The Chinese market shifted its focus to sourcing cheaper imports, reflecting a cautious approach, geared toward minimising costs.
  
  
• Drop in NMDC's prices: The National Mineral Development Corporation (NMDC) decreased list prices of iron ore calibrated lump ore (CLO) and fines by INR 600/t ($7) and INR 500/t ($6), effective 7 August 2024. Post revision, prices of DR CLO (10-40 mm, Fe67%) stood at INR 6,420/t ($76/t) and of iron ore fines (-10 mm, Fe64%) at INR 4,610/t ($55/t) on FOR basis from NMDC's Bacheli complex. Prices included royalty, DMF, and NMET charges. Meanwhile, fines prices hit a ten-month low, with these price levels last seen in October 2023, as per BigMint's data.
  
  

M-o-M pellet trade comparison

Pellex drops m-o-m amid competitive pricing, sluggish export market

The monthly average of BigMint's domestic pellet index, PELLEX, was assessed at INR 9,000/t, down by INR 200/t m-o-m. This drop was driven by competitive pellet offers from Odisha, which put pressure on local buyers. The sluggish export market also weighed on PELLEX in August 2024.

Outlook

With lower realisation in exports, pellet players were seen diverting their supplies to domestic markets, largely in central India. Thus, domestic pellet trade volume may see some increment.