India: PELLEX falls by INR 150/t ($2/t) following drop in offers

• Raipur pellet makers lower offers by INR 200-300/t ($2.5-4/t)
  
  
• Competitive offers from Odisha keep Raipur offers under pressure
  
  
• Sponge iron prices surge, while billet prices decline w-o-w
  
  

Pellet producers in Raipur have recently lowered their offers by INR 200-300/tonne (t) ($2.5-4/t) due to a sluggish sponge and finished steel market, coupled with competitive pricing from Odisha. Meanwhile, buyers have shown increased interest in procuring material from neighbouring regions due to the price disparity.

BigMint's bi-weekly domestic pellet (Fe63%) index dropped by INR 150/t ($2/t) to INR 8,800/t ($105/t) DAP Raipur as of 30 August 2024, compared to 27 August. Around 5,000 t of pellets (Fe63%) were sold by Raipur pellet producers at revised offers of INR 9,000/t ($107/t) DAP Raipur. Additionally, Raipur buyers booked around 20,000 t of pellets (Fe62.5%) from Odisha at INR 8,200-8,300/t ($98-99/t) DAP Raipur a few days back.

A buyer from Raipur said that the bid-offer gap has forced local producers to decline pellet offers. Although a few deals have been closed at the revised offers, buyers expect workable prices from the local plants.

Buyers in Raipur still have inventory for the next few weeks, but those with declining inventories are expected to replenish stocks in the coming days. However, buyers are not in a hurry for bulk booking, as the movement of material from nearby locations is a challenge in the rainy season.

Rationale:

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
  
  
• Four (4) deals have been reported so far in this publishing window, and three (3) have been considered for price calculation and accorded 50% weightage for T1 trade.
  
  
• Nineteen (19) firm offers, bids, and indicative prices were heard. Seventeen (17) were taken for price calculation and given the balance 50% weightage.
  
  

Factors influencing PELLEX

• Pellet offers fall in Raipur: Raipur-based pellet makers have reduced their pellet offers for Fe 63%(+/_0.5%) by INR 200/t ($2.5/t) to INR 8,900/t ($106/t) exw-Raipur today. The recent drop in Odisha Mining Corporation (OMC) fines bids m-o-m for the August auction and competitive pellet offers from the Odisha region led to this fall in offers.
  
  
• Sponge iron prices stable w-o-w: P-DRI prices inched up by INR 100/t ($1/t) w-o-w to INR 24,850/t ($296/t) exw-Raipur on 30 August. However, prices rose by INR 150/t ($2/t) d-o-d today. No trading activity was witnessed in Raipur today, as buyers were not willing to purchase material at the higher prices.
  
  
• Billet prices sink w-o-w: Billet prices in Raipur declined by INR 100/t ($1/t) w-o-w to INR 38,350/t ($457/t) exw. On a d-o-d basis, billet prices inched up by INR 50/t ($1/t) d-o-d. Weak buying interest continued to weigh on the billet index, extending the ongoing downtrend. The market faced further corrections in anticipation of an improved buying activity. However, buyers remained less active despite the availability of lower offers d-o-d. This lack of interest from buyers contributed to a persistent downward pressure on market offers.
  
  

Outlook

According to BigMint's analysis, pellet prices in Raipur are expected to remain volatile, as buying interest is subdued at the current offers from local producers. Buyers are likely to delay deals, anticipating a potential revision in iron ore prices by NMDC soon.