India: PELLEX falls further as producers cut offers

• Raipur pellet prices drop by INR 300-400/t recently
  
  
• Sponge PDRI, steel prices under pressure w-o-w
  
  

BigMint's bi-weekly domestic pellet (Fe63%) index fell by INR 150/tonne (t) ($2/t) to INR 8,900/t ($108/t) DAP Raipur on 23 July, 2024 compared to the last assessment on 19 July. PELLEX dropped to a 1-year low. The last time such levels were recorded was in the first half of August 2023, as per data maintained with BigMint.

Around 100,000 t of raw pellet deals were concluded in the Raipur region at INR 8,950/t DAP Raipur by the pellet producers. Most of the deals were concluded post-price cut in Raipur by pellet producers followed by the OMC auction.

A sponge producer said, "The buyers were waiting for the prices to drop post-OMC auction from the last week and remained cautious. The active buying from participants has been witnessed recently after the drop in pellet prices. Those who were previously looking for the neighbouring region material at competitive prices purchased raw pellets from local plants."

As per sources, the significant drop in the sponge-PDRI and finished steel prices had created a selling pressure on pellet producers. The buyers' bids were continuously low against the offers which led to a drop in the Raipur pellet prices. On the other hand, major producers from Odisha recorded their offers at INR 8,500-8,800/t DAP Raipur for Fe62.5% pellets. No active deals were recorded from the Odisha region for Raipur in the last few days as local steelmakers booked from Raipur plants.

Rationale:

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology Click here.
  
  
• Three (3) deals have been reported so far in this publishing window and all were considered for price calculation and accorded 50% weightage for T1 trade.
  
  
• Twenty two (22) firm offers, bids, and indicative prices were heard. Sixteen (16) were taken for price calculation and given the balance 50% weightage.
  
  

Factors driving PELLEX

• Raipur pellet offers fall: Raipur-based pellet makers have cut their pellet offers for Fe 63%(+/-0.5%) by INR 300-400/t ($4-5/t) to INR 8,800-8,900/t ($105-106/t) exw-Raipur yesterday. A drop in sponge iron prices and fallen bids in the OMC auction m-o-m last week have influenced pellet producers to reduce their pellet offers. However, outside Raipur pellet offers also kept the market competitive.
  
  
• Sponge iron prices fall INR 500/t w-o-w: P-DRI prices fell by INR 500/t w-o-w to INR 25,300/t ($302/t) exw-Raipur on 23 July. However, d-o-d, prices inched down by INR 50/t ($0.5/t) compared to yesterday. Sponge prices slowed due to constant selling pressure and weakening market sentiment. Despite the considerable price fall, buying activity remained modest as purchasers remained cautious, anticipating future market declines and looking for stability.
  
  
• Billet prices drop INR 850/t w-o-w: Billet prices in Raipur dropped by INR 850/t ($3-4/t) w-o-w to INR 38,750/t ($463/t) exw today, while prices rose by INR 150/t ($2/t) d-o-d. The index remained range-bound today with a slight increase, reflecting a market constrained by weak demand and fluctuating sentiments.
  
  

Outlook

According to BigMint analysis, pellet prices in Raipur are expected to remain stable as the bid and offer disparity narrowed post-price cut recently. However, offers from outside Raipur are also nearer to the local offers.