India: PELLEX falls by INR 350/t ($4/t) on sharp drop in sponge prices

• Sponge, steel prices drop over INR 800/t w-o-w
  
  
• Buyers await for OMC iron ore auction
  
  

BigMint's bi-weekly domestic pellet (Fe63%) index dropped by INR 350/t ($3-4/t) to INR 10,300/t ($123-124/t) DAP Raipur on 18 June, 2024 compared to the last assessment on 14 June. No active deals of standard grade (Fe62.5/63.5%) were recorded in Raipur due to a lack of buyers' response. However, a prominent seller sold around 30,000 t higher grade pellets (Fe 66%) at INR 12,950/t ($155/t) DAP Raipur this week.

The pellet buying (for Fe 62.5/63) interest remained absent in Raipur amid lacklustre market sentiments over the last few weeks. The buyers opted for a wait-and-watch mode and didn't book any material ahead of the OMC iron ore auction. Falling sponge and other semi-finished prices kept the buyers at bay for new booking. However, they already have sufficient material for the next few weeks considering monsoon season.

A buyer said that most of the sponge makers from Raipur have sufficient inventory for the next few days and a few of them didn't even inquire about the material. The workable prices stood at INR 10,000-10,100/t DAP Raipur but no major deals concluded in the last few days. They may purchase raw pellets after the OMC auction expected to be scheduled on 20 June.

Rational:

• 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 was not considered for price calculation and accorded 0% weightage for T1 trade.
  
  
• Twenty (20) firm offers, bids, and indicative prices were heard. Sixteen (16) were taken for price calculation and given the balance 100% weightage.
  
  

What factors weighed on Pellex?

• Raipur local pellet offers under pressure: Raipur pellet offers recorded at INR 10,800/t ($129-130/t) exw recently. The major pellet producers in Raipur did not offer Fe 63.5% pellets but keeping for Fe 66% grade pellets at INR12,800/t ($153/t) exw. An Odisha-based pellet producer said that we were offered the raw pellet in Raipur at INR 500-600/t less than the local pellet prices but didn't receive an inquiry from the buyers. The pellet market in the Central Eastern region had dropped sharply in the last two weeks amid the lack of deals and fall in steel prices.
  
  

• Landed offers from eastern India drop: Eastern India-based pellet makers still showed interest in selling material in the Raipur region at around INR 9,600-10,100/t ($115-121/t) for Fe 62.5%pellets but no deals were witnessed in this publishing window. Owing to lack of exports deal in pellet compelled eastern India players to explore central market.
  
  
• Sponge pellet prices fall w-o-w: P-DRI prices fell by INR 850/t ($10/t) w-o-w to INR 26,400/t ($317/t) exw on 14 June. Meanwhile, prices dropped by INR 200/t ($2.5) d-o-d. Sponge iron prices in India witnessed a decrease of INR 150-600/t in all major regions, driven by a downtrend in semi-finished steel today.
  
  
• Steel billet prices drop w-o-w: Billet prices in Raipur fell by INR 1,650/t ($20/t) w-o-w to INR 42,050/t ($504/t) exw today, while prices decreased by INR 400/t ($5/t) on a d-o-d basis. The index saw further corrections today, continuing the downtrend that has been weakening the market. Weak buying inquiries throughout the day kept offerings on the lower side, leading to limited buying activity in the semi-finished steel at lower prices.
  
  

Outlook

The pellet market in Raipur region will get clarity after the OMC iron ore auction. However, few sources said that prices will fall after the OMC auction to conclude the deals.

A market participant said: "The supply of material is high while demand has been lacking in the last few days. The market will be clearer after the OMC auction as steelmakers expect a drop in the base prices of the auction. The market dynamics will be decided only after this auction."