India: PELLEX drops to over 2-month low following recent price cuts by local producers

• Raipur pellet offers fall INR 800/t ($10/t) recently, deals subdued
  
  
• Landed offers from Odisha also drop
  
  
• Sponge, finished steel prices drop INR 1,400-2,500/t ($17-30/t) w-o-w
  
  

BigMint's bi-weekly domestic pellet (Fe63%) index dropped by INR 50/t ($1/t) to INR 9,800/t ($116/t) DAP Raipur on 25 June, 2024 compared to the last assessment on 21 June. The index hit two and half month low as similar levels were last seen in mid-April, 2024, as per data maintained with BigMint. No deals were recorded in the Raipur region amid lower buying interest from buyers.

Pellet prices dropped in the Raipur region as local plants decreased their offers and landed offers from Jharsuguda also fell post-OMC auction amid weak demand. The buyers remained cautious as sponge pellet prices continuously decreased and hit a three-year low. Falling export from eastern region shifted the focus into the Indian domestic market increased supply in the eastern region.

A steelmaker said, " Producers are waiting for sponge prices to stabilise, but competitive offers from neighbouring regions and declining finished steel prices have pressured sponge prices. Consequently, despite local pellet makers lowering their offers, buyers are reluctant to purchase material at the current market dynamics."

Bid-offer disparity still exists in the market which led trades slowdown however buyers are still exploring near by markets for better margins. Approaching monsoon is also a matter of concern in the upcoming days though steelmakers still maintaining sufficient inventory for the next few weeks.

Rationale:

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology Click here.
  
  
• No deal was reported so far in this publishing window and not considered for price calculation and accorded 0% weightage for T1 trade.
  
  
• Twenty (20) firm offers, bids, and indicative prices were heard. Thirteen (13) were taken for price calculation and given the balance 100% weightage.
  
  

Factors weighing Pellex down

• Raipur pellet offers drop INR 800/t ($10/t): Raipur-based pellet makers have reduced their offers for Fe 63%(+/- 0.5%) by INR 800/t ($10/t) to INR 9,900-10,000/t ($119-120/t) exw-Raipur yesterday.
  
  
• 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 8,850-9,400/t ($115-116/t) DAP Raipur for Fe 62.5% pellets but no deals were witnessed in this publishing window. The pellet prices in the Odisha region fell over INR 700/t compared to last week.
  
  
• Sponge pellet prices over three-years low: P-DRI prices fell by INR 1,400/t ($17/t) w-o-w to INR 25,000/t ($300/t) exw Raipur on 25 June. On a d-o-d basis, prices dropped by INR 100/t. Limited spot transactions were seen which led to a decline in both offers and bids.
  
  
• Steel billet prices at four-month low: Billet prices in Raipur significantly fell by INR 2,500/t ($30/t) w-o-w to INR 39,550/t ($474/t) exw today, while prices decreased by INR 500/t ($1/t) on a d-o-d basis. The index continued its downtrend with continuous correction observed over the past few days, reaching a new four-month low.
  
  

Outlook

The market is expected to remain volatile in the near term following buyers' cautious approach and pressure from the other commodity prices. The trades are yet to be improved in the Raipur region for price clarity between the market participants.

A market participant stated, "The near-term outlook for pellets remains uncertain, as buyers are hesitant about making purchases. Declining raw material prices in Odisha and the central-eastern regions, along with the downtrend in sponge prices, have put the pellet market in a wait-and-see mode."