India: PELLEX falls by INR 200/t ($2.5/t) following price reduction in Raipur

• Pellet offers fall by INR 200-300/t today
  
  
• Sponge iron, billet prices under pressure
  
  
• Bid-offer disparity narrows
  
  

BigMint's bi-weekly domestic pellet (Fe63%) index dropped by INR 200/t to INR 9,350/t ($111/t) DAP Raipur on 9 July, 2024 compared to the last assessment on 5 July. Around 15,000 t of deals were concluded by producers in Raipur, Chhattisgarh at revised offers of INR 9,400/t ($112/t) DAP Raipur in this publishing window.

The producers in the region reduced pellet prices today following a cautious approach from buyers over the last few days. Sponge iron manufacturers from the neighbouring regions quoted competitive prices which created selling pressure on the Raipur-based plants.

Producers in Odisha are offering at INR 8,800-9,200/t (Fe 62.5%) DAP Raipur, largely stable w-o-w However, no deal was recorded by BigMint amid sufficient inventories with buyers.

A steelmaker said, "Cautious approach of buyers coupled with the decrease in sponge iron and finished steel prices put pressure on prices in Raipur. Some steelmakers have shown preference for iron ore lumps due to the cost-effectiveness."

A few buyers are waiting for further reductions, planning to purchase pellets at INR 8,900-9,000/t DAP following weakening prices in Raipur. However, bids and offers narrowed post price cuts by sellers, although buyer are still bidding low.

As per sources, buyers are waiting for price stability in the sponge iron and finished steel segments before striking fresh pellet deals. Buyers are still hesitant to procure material at revised offers amid price uncertainty for sponge-based pellets. A few buyers have booked iron ore lumps in NMDC's auction last week due to hesitation around buying pellets.

NMDC conducted an auction for 92,000 t of iron ore from its Bacheli and Kirandul mines in Chhattisgarh on 6 July. From Bacheli, around 12,900 t of DRCLO (Fe 67%) was booked at a 1% premium on the floor prices.

Rationale:

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology Click here.
  
  
• One (1) deal has been reported so far in this publishing window and considered for price calculation and accorded 50% weightage for T1 trade.
  
  
• Twenty-five (25) firm offers, bids, and indicative prices were heard. Twenty (20) were taken for price calculation and given the balance 50% weightage.
  
  

Factors driving PELLEX-

• Raipur pellet offers drop INR 200-300/t: Raipur-based pellet makers have dropped their pellet offers for Fe 63%(+/_0.5%) by INR 200-300/t ($4/t) to INR 9,200-9,300/t ($110/t) exw-Raipur today. The sponge and finished steel prices were recorded under pressure in the last few days along with prices cut by NMDC Chhattisgarh had forced pellet producers to reduce the pellet offers.
  
  
• Sponge iron prices drop INR 650/t w-o-w: P-DRI prices dropped by INR 650/t ($8/t) w-o-w to INR 25,600/t ($307/t) exw-Raipur on 9 July. D-o-d, prices remained largely stable. Decent deals were witnessed in Raipur today as participants actively purchased in the second half of the trading day.
  
  
• Billet prices fall by INR 1,450/t w-o-w: Billet prices in Raipur dropped by INR 1450/t ($18/t) w-o-w to INR 39,300/t ($471/t) exw today, while prices inched up by INR 50/t ($0.5/t) on a d-o-d basis. The index rose slightly as the offering increased in the second half of the session, owing to the influence of the northern market, which raised market sentiment. However, purchasers chose to wait, resulting in low to moderate trading for semi-finished material.
  
  

Outlook

Pellet trades in Raipur are yet to improve as major buyers are waiting for clarity following the downtrend in the downstream steel market.

A market participant said, that recently a few port-based plants had exported pellets from the east coast of India and received prices of $120-122/t CFR China. But sellers in the central and eastern regions have no option but to sell in the domestic market as their export realisations are lower due to higher logistics costs. It is expected that domestic pellet prices may drop in the near term following the decline in iron ore prices.

*Correction: The delivery term for the Donimalai pellet deal has been updated in the deal table on the ex-plant (FOT Basis) which previously mentioned EXW.