India: PELLEX falls marginally post-NMDC's iron ore price reduction

• NMDC drops iron ore prices by INR 500-600/t for August
  
  
• Few Raipur pellet plants are not offering this week
  
  
• Sponge iron, billets prices sharply drop w-o-w
  
  

The pellet buyers in the Raipur region remained sidelined and didn't purchase any pellets due to the downtrend market sentiments and continuous drop in the sponge and finished steel prices in the central Indian steel market. The Raipur producers kept their offers on hold this week even after the iron ore price reduction by the NMDC and completing their previous orders' delivery.

BigMint's bi-weekly domestic pellet (Fe63%) index dropped by INR 50/t ($0.5/t) to INR 9,000/t ($107/t) DAP Raipur on 9 August, 2024 compared to the last assessment on 6 August. No pellet deal was reported by the Raipur steelmakers in this publishing window.

Sources said that a few Odisha-based producers sold material at INR 8,300-8,500/t DAP Raipur. However, buyers are mostly waiting for the price revision in the Raipur region post-NMDC's price cut.

A steelmaker said that local plants have not sold any material as they made decent transactions with the last offer while few buyers inquired from the neighbouring regions. Odisha-based pellet producers actively offered in the Raipur region. However, buyers are reluctant to buy pellets amid monsoon. Few buyers are not sure and opted for the option of wait and watch mode.

The pellet prices are expected to remain under pressure due to a drop in the NMDC iron ore prices for August and a continuous fall in the pellet offers by Odisha producers under selling pressure. The liquidity in the market has been slow in recent days amid the limited demand for finished steel by the end users, a source informed BigMint.

NMDC decreased list prices of iron ore CLO (calibrated lump ore) and fines by INR 600/t($7) and INR 500/t ($6), BigMint learnt from sources. The company's prices are effective from 7 August 2024. The miner has fixed prices of DR CLO (10-40mm, Fe67%) at INR 6,420/t ($76/t) and of iron ore fines (-10mm, Fe64%) at INR 4,610/t ($55/t) on FOR basis from its Bacheli complex. Prices include royalty, DMF and NMET charges. Fines prices have hit a ten-month low as these price levels were last seen in October, 2023, as per BigMint.

Rationale:

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology Click here.
  
  
• No deal has been reported so far in this publishing window and has not been considered for price calculation and accorded a 0% weightage for T1 trade.
  
  
• Twenty-five (25) firm offers, bids, and indicative prices were heard. Twenty-one (21) were taken for price calculation and given the balance 100% weightage.
  
  

Factors driving PELLEX-

• Pellet offers stable in Raipur: Raipur-based pellet producers have kept their offers stable for Fe 63% (+/-0.5) pellets at INR 9,100/t ($109/t) exw-Raipur. A few sellers had taken a maintenance shutdown this week after the active sales at the beginning of the month.
  
  
• Sponge iron prices drop INR 750/t w-o-w: P-DRI prices fell by INR 750/t ($9/t) w-o-w to INR 24,200/t ($288/t) exw Raipur on 9 August. However, d-o-d, prices dropped by INR 200/t ($2-2.5/t). Deals remained silent today in Raipur amid the downtrend market sentiments.
  
  
• Billet prices down by INR 600/t w-o-w: Billet prices in Raipur decreased by INR 600/t ($8/t) w-o-w to INR 38,200/t ($455/t) exw today, while prices fell by INR 200/t ($4/t) d-o-d. Billet prices saw further correction today due to muted buying interest in both semi-finished and finished steel.
  
  

Outlook

According to BigMint's analysis, pellet prices in Raipur are expected to remain volatile in the near term due to NMDC iron ore price reduction and continuous drop in the sponge and finished steel prices. Few sponge makers have sufficient raw material inventory from their previous purchases and are not in a hurry about instant pellet buying.