India: PELLEX falls by INR 150/t ($2/t) amid drop in pellet prices

• Raipur pellet offers drop by INR 300/t

  
  
  

• Sponge, billet prices remain in flux

  
  
  

BigMint's bi-weekly domestic pellet (Fe63%) index fell by INR 150/t ($2/t) to INR 8,650/t ($104/t) DAP Raipur as on 6 September 2024, compared to 3 September. This decline comes on the back of Raipur-based pellet producers reducing their pellet offers. Amid range-bound sponge and finished steel prices, pellet offers remained under pressure following bid-offer disparities.

Around 35,000 t of pellets (Fe63%) were sold by pellet producers at INR 8,750/t ($104/t) DAP Raipur. Additionally, Raipur buyers booked around 4,000 t of pellets (Fe62.5%) from Odisha at INR 8,300/t ($99/t) DAP some days back. Fresh pellet offers from Odisha were heard to be at around INR 8,000/t DAP Raipur.

A sponge iron maker said, "Trade activity in the market is at a moderate level, as buyers are purchasing from both local and neighbouring plants as per their inventory. The recent drop in local pellet prices has led to the conclusion of some active deals from Raipur producers. We have procured enough material in the past few days and will not purchase at the current offers."

Another participant revealed that buyers are still hesitant about making aggressive purchases at the new offers due to current market dynamics. They are not sure about the stability of the pellet prices ahead of the iron ore price revision by NMDC and downtrend in steel market sentiments. They are purchasing only enough material to operate the plant. However, the gap between local offers and landed offers from Odisha has narrowed following a reduction in pellet prices by local producers.

A few deals were closed by Raipur buyers, while others are under negotiation and have not been finalised till now.

As per sources, NMDC may announce new prices for September delivery in the upcoming days.

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
  
  
• Two (2) deals were reported in the publishing window, and both were considered for price calculation and accorded 50% weightage for T1 trade.
  
  
• Twenty-one (21) firm offers, bids, and indicative prices were heard. Fifteen (15) were taken for price calculation and given the balance 50% weightage.
  
  

Factors influencing PELLEX

• Pellet offers slide in Raipur: Raipur-based pellet makers reduced their offers for Fe 63% (+/_0.5%) by INR 300/t ($4/t) to INR 8,600/t ($102/t) exw-Raipur on 3 September. Active buying from Odisha at INR 8,100-8,400/t DAP Raipur and a drop in P-DRI and finished steel prices led to a fall in Raipur pellet offers.
  
  
• Sponge iron prices fall w-o-w: P-DRI prices decreased by INR 150/t ($2/t) w-o-w to INR 24,700/t ($294/t) exw-Raipur on 6 September. However, prices rose by INR 200/t ($2.5/t) d-o-d today. Deal momentum remained weak throughout the day amid slow market activity ahead of the Ganesh Chaturthi festival.
  
  
• Billet prices decline w-o-w: Billet prices in Raipur declined by INR 400/t ($5/t) w-o-w to INR 37,950/t ($451/t) exw. However, on a d-o-d basis, billet prices increased by INR 150/t ($2/t). The index showed a downtrend amid a lack of buying confidence among end-users, and trade activity remained low.
  
  

Outlook

According to BigMint's analysis, pellet prices in the Raipur region may remain uncertain in the coming days as buyers await NMDC's price revisions for iron ore, which are expected to be right around the corner.