India: Pellet trade volumes rise 25% m-o-m in Aug'23

Pellet trade volumes in the domestic market rose significantly by 25% m-o-m to 763,500 tonnes (t) in August 2023 compared to 609,700 t in July, according to data maintained with SteelMint.

Factors driving higher trade

• Better market realisations- Domestic pellet market realisation was better in August and demand from China was also subdued. The pellet export ex-plant price realisation (monthly average) for the Barbil region fell by 4% m-o-m to INR 6,900/t in August compared to INR 7,200-7,300/t in July. Pellet prices stood at around INR 7,900-8,000/t loaded on to wagon for Barbil, eastern India, in August.
  
  

• Increased preference for pellets- Due to the rainy season buyers are preferring pellets over lumps, as pellets contain lower moisture than lumps. With increasing demand, sales of pellets also increased in August which drove domestic pellet prices up by 4% m-o-m.
  
  

• Bids rise in OMC iron ore auction- Odisha Mining Corporation (OMC) conducted an auction for 2.4 mnt of iron ore fines (Fe 54-62%) in August in which bids for fines increased by up to INR 50-750/t for all the lots over the floor prices. In the recent auction in September, too, bids for fines increased further up to INR 50-850/t except for two lots. Notably, in the July and August auctions, the entire volumes were booked.
  
  

• Rise in sponge prices- Increase in sponge PDRI prices in Raipur, Durgapur, Barbil, Jamshedpur and Raigarh supported pellet prices in the domestic market. Steelmakers were willing to produce more pellets in order to maintain their production levels and meet higher demand during the rainy season.
  
  

• Logistical hurdles- Logistical challenges such as transportation delays are frequent during monsoons not to mention difficulties in mining and processing operations. This restricted the supply of iron ore in different regions.
  
  

Pellet prices rise

Domestic pellet prices exhibited an upward trend in August, Prices across key markets rose by 3% m-o-m. The monthly average of SteelMint's domestic pellet index, PELLEX, was assessed at INR 9,250/t, up 3% m-o-m in August as compared to INR 8,950/t in July.

Outlook

The domestic pellet market outlook seems positive as iron ore supply from miners is still a concern. It is expected that an increase in ore prices may support pellet prices too.