India: PELLEX falls by INR 50/t on muted trade, bid-offer disparity

BigMint's bi-weekly domestic pellet (Fe63%) index fell by INR 50/t to INR 9,100/t ($109/t) DAP Raipur on 16 July, 2024 compared to the last assessment on 12 July. No major pellet deals were witnessed in the Raipur region amid lack of buying interest. Major sponge iron producers remained in a wait-and-watch mode as they were waiting for price recovery in the sponge and finished steel segments.

Pellet buyers remained cautious over the last couple of days and no major trades were concluded in Raipur. A few Odisha- and Raigarh-based producers offered Fe 62.5% grade pellets at around INR 8,500-8,950/t DAP Raipur but no deal was heard so far this week.

A sponge producer said, "We saw a mixed price trend in downstream steel prices which kept the pellet buyers away from active transaction amid the lack of price clarity. Major buyers are eyeing INR 8,800-9,000/t DAP levels in view of current market dynamics. Yesterday, the market showed some uptrend as sponge and billet prices increased but today prices have again dropped against all expectations."

As per sources, mills have a few days' pellet inventory and some of them are using iron ore lumps procured from NMDC in view of cost-effectiveness as against pellets. Some buyers frequently purchase from Odisha-based sellers to meet their immediate requirements from time to time.

Rationale:

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology Click here.
  
  
• No deals have been reported so far in this publishing window and not considered for price calculation and accorded 0% weightage for T1 trade.
  
  
• Twenty-seven (27) firm offers, bids, and indicative prices were heard. Sixteen (16) were taken for price calculation and given the balance 100% weightage.
  
  

Factors driving PELLEX-

• Raipur pellet offers stable: Raipur-based pellet makers kept offers stable for Fe 63%(+/-0.5%) at INR 9,200-9,300/t ($110/t) exw-Raipur today.
  
  
• Sponge iron prices fall d-o-d: P-DRI prices remained fell by INR 300/t d-o-d at INR 25,800/t ($308/t) exw-Raipur on 16 July. However, w-o-w, prices rose by INR 200/t ($4/t) compared to last week. Indian sponge iron prices have dropped by INR 50-300/t in almost all major locations today.
  
  
• Billet prices drop by INR 350/t d-o-d: Billet prices in Raipur dropped INR 350/t ($3-4/t) d-o-d to INR 39,600/t ($473/t) exw today, while prices rose by INR 300/t ($3/t) w-o-w. This demand reduction has resulted in downward adjustments in spot offers. Participants are maintaining a cautious outlook, anticipating further correction in the near term due to unsupportive finished steel market sentiments.
  
  

Outlook

As per BigMint analysis, pellet prices in Raipur are expected to remain volatile considering buyers' cautious approach amid declining PDRI prices.

A sponge producer said, "An INR 300-400/t price disparity between bids and offers is being seen in Raipur. If the market continues to remain the same then local pellet producers are expected to reduce their offers in the near term."