India: PELLEX falls INR 50/t ($1/t) as bid-offer disparities limit trade

• Raipur buyers reject Odisha sellers' higher offers
  
  
• Falling sponge PDRI, steel prices inhibit demand
  
  

The Raipur pellet market remained stable this week, as local producers kept their offers unchanged. Despite the stability, limited trades were observed due to the disparity between bids and offers. Influenced by weak market sentiments, buyers showed reluctance towards prevailing prices.

BigMint's bi-weekly domestic pellet (Fe63%) index decreased by INR 50/tonne (t) ($1/t) to INR 9,200/t ($109/t) DAP Raipur on 26 November compared to the previous assessment on 22 November. Deals remained absent in both local and neighbouring pellet-producing regions in this publishing window.

Some Odisha-based producers offered material to buyers in Raipur at INR 9,000-9,500/t ($107-113/t) (Fe62.5-63%) DAP. However, they failed to conclude deals amid wide offer gaps with local sellers, who priced their material at INR 9,000-9,100/t ($107-108/t).

Overall market sentiment was subdued, particularly because offers from Odisha were significantly higher than Raipur's local offers. This disparity made it unfeasible for buyers to finalise deals for materials sourced from Odisha. Market participants observed that no significant transactions were reported for these higher-priced deliveries.

The low demand for pellets is connected to a decline in sponge PDRI and steel prices. This situation in the downstream steel market has reduced buyers' interest in securing new contracts, as they are waiting for either a decrease in pellet prices or a recovery in steel tags before finalizing any deals.

A local trader commented, "Major buyers have been absent from the market due to weak market dynamics. There was a disparity of approximately INR 500-700/t ($6-9/t) between bids and offers, which limited pellet transactions in Raipur. In the coming days, we can expect only essential purchases to take place if sentiment remains unchanged. Buying inquiries have significantly decreased amid poor steel market conditions."

Overall, market participants remain cautious, waiting for cues from the steel market or a correction in pellet prices, which would cause trade activities to pick up.

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. Thus, the T1 trade category was accorded 0% weightage and not considered for price calculation.
  
  
• Twenty one (21) firm offers, bids, and indicative prices were heard. Sixteen (16) were taken for price calculation and given the balance 100% weightage.
  
  

Factors driving PELLEX

• Pellet offers stable in Raipur: Raipur-based pellet makers kept their Fe63% (+/_0.5%) pellet offers stable w-o-w at INR 9,000-9,100/t ($107-108/t) exw. GPIL offered Fe63.5% and Fe65.5% grade pellets at INR 9,600/t ($114/t) and INR 10,800/t ($128/t) exw.
  
  
• Sponge iron prices drop w-o-w: P-DRI prices decreased by INR 300/t ($4/t) w-o-w to INR 24,900/t ($295/t) exw-Raipur on 26 November. Meanwhile, prices fell INR 100/t d-o-d today.
  
  
• Billet tags fall w-o-w: Billet prices in Raipur reduced by INR 450/t ($5/t) w-o-w to INR 38,800/t ($460) exw today. However, d-o-d, prices inched down by INR 100/t ($1/t). The index underwent correction today, influenced by persistently weak demand and subdued buying in the semi-finished and finished steel segments. Market participants exhibited caution amid subdued sentiments, leading to limited transactions in the semi-finished steel segment.
  
  

Outlook

According to BigMint's analysis, pellet prices in the Raipur region are expected to remain under pressure in the coming days due to the lack of buying interest at current prices. However, Odisha producers' higher delivered prices for Raipur buyers may keep local sellers' offers firm in the short term.