India: PELLEX falls to one-year low, buyers await OMC auction results

• Sponge prices under pressure w-o-w
  
  
• No major deals from Odisha, Raipur
  
  

BigMint's bi-weekly domestic pellet (Fe63%) index fell by INR 50/tonne (t) to INR 9,050/t ($109/t) DAP Raipur on 19 July, 2024 compared to the last assessment on 16 July. PELLEX dropped to a year's low. The last time such levels were seen in the first half of August 2023, as per data maintained with BigMint.

No major pellet deals were witnessed in the Raipur region amid a lack of buying interest. Major sponge iron producers remained in a wait-and-watch mode as they were waiting for price recovery in the sponge and finished steel segments. Odisha's leading miner, OMC, dropped the iron ore fines base prices by INR 700-800/t m-o-m yesterday for the 20 July auction.

A sponge producer said, "Major buyers are expecting pellet prices in Raipur to drop next week because of which deals were absent in recent days. Sponge-makers are waiting for the OMC auction results for price clarity. On the other hand, local pellet producers kept their offers stable."

As per sources, the significant drop in the sponge-PDRI prices led to reduced pellet buying interest in the central-eastern regions. Buyers are worried about the current market dynamics.

Major producers from Odisha recorded their offers at INR 8,500-8,800/t DAP Raipur for Fe62.5% pellets. On the other hand, a bid-offer disparity of INR 200-400/t was seen in the last couple of days. Sellers kept pellet offers stable, waiting for OMC's iron ore auction.

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 and not considered for price calculation and accorded 0% weightage for T1 trade.
  
  
• Twenty-five (25) firm offers, bids, and indicative prices were heard. Seventeen (17) were taken for price calculation and given the balance 100% weightage.
  
  

Factors driving PELLEX

• Raipur pellet offers stable: Raipur-based pellet makers kept offers stable for Fe63%(+/-0.5%) at INR 9,200-9,300/t ($110/t) exw-Raipur today.
  
  
• Sponge iron prices fall INR 300/t w-o-w: P-DRI prices fell by INR 300/t w-o-w at INR 25,450/t ($304/t) exw-Raipur on 19 July. However, d-o-d, prices dropped by INR 200/t ($2.5/t) compared to last week. Indian sponge iron prices have dropped by INR 50-450/t in almost all major locations today.
  
  
• Billet prices hit six-month low: Billet prices in Raipur dropped by INR 300/t ($3-4/t) d-o-d to INR 38,900/t ($464-465/t) exw today, while prices significantly decreased by INR 600/t ($7/t) w-o-w. Reduction in demand has led to decreased spot offers. The billet index hit six-months low as per data maintained with BigMint.
  
  

Outlook

As per BigMint, pellet prices in Raipur are expected to remain under pressure amid the continuous drop in the downstream steel segment. Amid the monsoons, pellet supply from nearby regions will also be a challenge.