India: PELLEX descends to two-month low in recent deals

• Sponge iron prices fall by over INR 1,000/t w-o-w
  
  
• Landed pellet offers from nearby locations down sharply
  
  
• Bids in OMC's iron ore auction drop around INR 1,000/t m-o-m
  
  

BigMint's bi-weekly domestic pellet (Fe63%) index dropped by INR 450/t ($5/t) to INR 9,850/t ($117/t) DAP Raipur on 21 June, 2024 compared to the last assessment on 18 June. The index has hit the lowest level in two months as similar levels were last seen in end-April'24, as per data maintained with BigMint.

Deals of 10,000 t pellets (Fe 62.5% +/- 0.5%) were concluded from Odisha to Raipur at around INR 9,500/t ($114/t) DAP Raipur in this publishing window.

Pellet prices in Raipur remained under pressure amid weak market sentiments and limited trade. The significant drop in the sponge pellet and finished steel prices kept the pellet market under stressed which resulted in minimal trading activity in the last couple of days.

A steelmaker said, "The sharp drop in downstream steel commodity prices weighed on pellet prices. Odisha-based pellet producers offered around INR 9,300-9,700/t DAP Raipur. The sharp reduction in prices by the local plants may improve buying interest in the region."

A few sources said that a sharp drop in bids in OMC's auction impacted prices in the central and eastern regions. In OMC's auction for 1.79 mnt of iron ore fines (Fe 54-65%) on 20 Jun'24 around 1.68 mnt (94%) was booked at INR 2,570-5,750/t ($31-69/t) ex-mines. Bids decreased around INR 900-1,000/t ($11-12/t) (weighted average) for the majority of fines lots against last month owing to a drop in pellet and sponge iron prices. Notably, the miner had reduced the base prices m-o-m in the range of INR 250-300/t ($3-4/t) for June.

The market saw an INR 200-300/t ($2.5-4/t) drop in pellet prices. It had created pressure on the local Raipur pellet prices also but major pellet producers kept the offers stable.

A nearby pellet producer mentioned that we offered the raw pellet below INR 9,600/t DAP ($115/t) to Raipur, but no inquiry was received from there. Major buyers remained on the sidelines and waited for market clarity.

Rationale:

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology Click here.
  
  
• One deal was reported so far in this publishing window and considered for price calculation and accorded 50% weightage for T1 trade.
  
  
• Twenty (20) firm offers, bids, and indicative prices were heard. Twelve (12) were taken for price calculation and given the balance 100% weightage.
  
  

Factors weighing Pellex down

• Raipur pellet offers under pressure: Raipur pellet offers recorded at INR 10,200-10,800/t ($124-129/t) exw recently. The major pellet producers in Raipur did not offer Fe 63.5% pellets but kept for Fe 66% grade pellets at INR 12,800/t ($153/t) exw. However, a prominent pellet producer dropped the offers to INR 10,100-10,200/t today but deals yet to conclude even at revised offers.
  
  
• Landed pellet offers from eastern India drop: Eastern India-based pellet makers still showed interest in selling material in the Raipur region at around INR 9,300-9,700/t ($115-116/t) for Fe 62.5%pellets but no deals were witnessed in this publishing window.
  
  
• Sponge pellet prices fall w-o-w: P-DRI prices fell by INR 1,050/t ($13/t) w-o-w to INR 25,800/t ($309/t) exw on 21 June. Sponge iron prices in India witnessed a decrease of INR 50-300/t in almost all major regions, driven by a downtrend in the semi-finished steel in the later half of the trading session today.
  
  
• Steel billet prices at three-month low: Billet prices in Raipur significantly fell by INR 1,850/t ($22/t) w-o-w to INR 41,200/t ($493/t) exw today, while prices decreased by INR 100/t ($1/t) on a d-o-d basis. The index dropped slightly today as market sentiments remained range-bound. Participants were expecting an upward correction in spot prices, but buyer interest was not supportive, causing the market to trade sideways.
  
  

Outlook

Pellet offers in Raipur are expected to drop next week amid the downtrend in market sentiments and lack of deals. As per sources, local sellers may reduce offers amid bid-offer disparity.

A market participant stated, "Buyers are hesitant to book material at current offers due to the lack of major deals in Raipur over the last two to three weeks. A few steelmakers are planning to make purchases next week in anticipation of a sharp drop in prices."