India: PELLEX falls INR 250/t ($3/t) amid limited trades, weak sentiments

• Sponge P-DRI, billet prices fall sharply w-o-w
  
  
• Market eyes OMC auction for price clarity
  
  

Pellet prices in the Raipur region have seen a significant decline w-o-w as local producers lowered their offers in response to weak market sentiments. The market is being pressured by a steep drop in sponge iron and steel prices over the past week, which has greatly affected pellet demand.

BigMint's bi-weekly domestic pellet (Fe63%) index decreased by INR 250/tonne ($3/t) to INR 9,600/t ($114/t) DAP Raipur on 19 November compared to the previous assessment on 15 November. Deals were absent in the Raipur region due to weak market sentiments and lack of buying confidence among mills.

Some Odisha-based producers are offering material to buyers in Raipur at INR 9,100-9,600/t (Fe62.5-63%) DAP but bulk deals have remained absent so far in this publishing window.

A Raipur-based steelmaker commented: "Buyers have largely adopted a cautious approach, opting to wait for a potential recovery in steel prices before making new purchases. This 'wait-and-watch' mode has resulted in the absence of significant deals in the market. Despite the reduced pellet offers from producers, inquiries have remained limited, highlighting the pressure on the region's pellet market."

Market participants are closely monitoring the steel sector, hoping for price stabilisation or an uptick that could improve liquidity and renew interest in pellet purchases. Until then, the sentiment is expected to remain bearish, with limited transactions taking place.

A pellet producer from the Odisha region informed, "The recent significant drop in sponge P-DRI prices, along with rising raw material costs in the region, has diminished buying interest for raw pellets. We are facing higher production costs, but buyers' bids have been much lower than our offers. As a result, we have not closed any deals in Raipur over the past few days."

Odisha's state miner, OMC, has maintained stable iron ore fines base prices m-o-m for the auction on 20 November. It has initiated an auction for 2 mnt of iron ore.

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 was not considered for price calculation. These were accorded 50% weightage for T1 trade.
  
  
• Seventen (17) firm offers, bids, and indicative prices were heard. Eleven (11) were taken for price calculation and given the balance 50% weightage.
  
  

Factors driving PELLEX

• Pellet offers fall in Raipur: Raipur-based pellet makers reduced Fe63% (+/_0.5%) offers on 18 November by INR 500/t ($6/t) to INR 9,400-9,500/t ($111-112/t) exw amid weak market liquidity and falling sponge and semi-finished steel prices. Godawari Power & Ispat (GPIL) lowered Fe63.5% pellet offers by INR 500/t to INR 9,900/t ($117/t) exw.
  
  
• Sponge iron prices drop sharply w-o-w: P-DRI prices sharply decreased by INR 1,350/t ($17/t) w-o-w to INR 25,200/t ($299/t) exw-Raipur on 19 November. Meanwhile, prices dropped by INR 100/t ($1/t) d-o-d today.
  
  
• Billet prices down w-o-w: Billet prices in Raipur declined by INR 750/t ($9/t) w-o-w to INR 39,200/t ($464) exw today. However, d-o-d, prices increased by INR 150/t ($2/t).
  
  

Outlook

According to BigMint's analysis, pellet price directions will become clearer after the OMC auction bids, which may help buyers establish a purchasing price level. Additionally, deals may remain limited due to mixed market sentiments regarding sponge and steel prices in the near term.