India: PELLEX falls INR 100/t ($1/t) on limited trades, declining DRI prices

• PDRI and billet prices fall over INR 1,000/t w-o-w
  
  
• Steelmakers wait for OMC iron ore auction
  
  

Pellet prices in Raipur have declined due to a gap between bid and offer prices, driven by weak market conditions downstream. Despite Odisha-based pellet producers lowering their offers to attract Raipur-based buyers, trade activity remained subdued. Most buyers were seen making only need-based purchases, remaining cautious and waiting for clearer price trends before committing to deals.

BigMint's bi-weekly domestic pellet (Fe63%) index decreased by INR 100/t ($1/t) to INR 9,850/t ($117/t) DAP Raipur on 15 November compared to the previous assessment on 12 November. An Odisha-based pellet producer sold around 15,000 t of pellets (Fe62.5%) at INR 9,600/t ($114/t)DAP Raipur in this publishing window.

Odisha-based sellers are trying to lure buyers with reduced offers, but the market is slow, and clarity on future prices is awaited. Some Odisha-based producers are offering material to buyers in Raipur at INR 9,300-9,600/t (Fe62.5-63%) DAP but bulk deals have remained absent so far this week.

This week, there has been a significant decline in prices of sponge PDRI and billets, which has negatively impacted buying confidence. Steelmakers are hesitant to make purchases at current prices, anticipating more favourable alternatives after the OMC auction. The auction is scheduled for 20 November.

"Buyers are anticipating additional price decreases since the current offers are INR 500-1,000/t ($6-12/t) higher than what is currently workable. The higher production cost for the pellet sponges makes us cautious about the new deals. Only those who need an immediate inventory of raw material are now purchasing the raw pellet with cheaper price options." remarked a buyer from a steel plant in Raipur.

This disparity, coupled with weak steel demand, continues to weigh on the pellet market, with participants eyeing the next OMC auction for direction.

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 was considered for price calculation. These were accorded 50% weightage for T1 trade.
  
  
• Twenty-two (22) firm offers, bids, and indicative prices were heard. Eighteen (18) were taken for price calculation and given the balance 50% weightage.
  
  

Factors driving PELLEX

• Pellet offers stable in Raipur: Local pellet producers in Raipur have opted to maintain their current offers, anticipating the results of the OMC auction, which could provide direction for fresh pricing strategies in the next week. Raipur-based producers kept their offers for Fe 63% (+/-0.5) pellets stable at INR 9,800-9,900/t ($117-118/t) exw-Raipur.
  
  
• Sponge iron prices drop sharply w-o-w: P-DRI prices sharply decreased by INR 1,400/t ($17/t) w-o-w to INR 25,500/t ($302/t) exw-Raipur on 15 November. Meanwhile, prices dropped by INR 250/t ($3/t) d-o-d today.
  
  
• Billet prices down w-o-w: Billet prices in Raipur declined by INR 1,050/t ($12/t) w-o-w to INR 39,000/t ($462) exw today. Furthermore, d-o-d, prices decreased by INR 300/t ($4/t) due to weak finished steel market dynamics.
  
  

Outlook

According to BigMint's analysis, the market will attain price clarity next week after the OMC auction. Pellet prices are expected to remain under pressure in the coming days.