India: PELLEX remains stable despite bid-offer disparity amid falling sponge iron prices

SteelMint's bi-weekly domestic pellet (Fe 63%) index, PELLEX, remained stable at INR 10,200/t DAP Raipur on 26 December, 2023 compared to the last assessment on 22 December amid a hike in offers. No deal was reported in this publishing window as bid-offer disparity prevailed. A few buyers sources mentioned that landed pellet offers from eastern India are lower by INR 200-300/t than prevailing offers in central India.

Pellet offers increased sharply over the last two weeks amid increased iron ore prices. Pellet-makers hiked offers amid increased production costs and supported by exports. However, sponge iron and steel prices have fallen over the last few days as deals have been heard at lower offers.

A trader source said, "The current steel market dynamic is unpredictable as pellet prices are high while sponge and steel prices have fallen. Buyers are just booking to cater to immediate needs to run operations at a lower production rate."

Other sources informed that buyers have stocks for the next 15-20 days that may keep them out of market for bulk bookings. However, offers are high and not suitable for sponge iron producers.

SteelMint's assessment for sponge P-DRI (FeM 80%) in Raipur decreased by INR 550/t w-o-w to INR 26,600/t exw on 26 December. Prices dropped sharply by INR 400/t d-o-d after the Christmas holidays. Semi-finished steel demand was stable despite the general sluggishness in the market.

As per sources, NMDC Chhattisgarh will revise iron ore prices soon, with the miner likely to declare offers in the next few days.

Rationale:

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology Click here.
  
  
• No deal was reported so far this week, not taken into account for price calculation and accorded 0% weightage for T1 trade.
  
  
• Twelve (12) firm offers, bids, and indicative prices were heard. Nine (9) were taken for price calculation and given the balance 100% weightage.
  
  

Market highlights:

• Godawari raises pellet offers: GPIL raised pellet (Fe 63.5%) offers by INR 300/t to INR 10,600/t ($127/t) today, while prices of high-grade pellets (Fe66%) are stable at INR 12,300/t ($148/t) exw-Raipur. However, other pellet-makers' offers in Raipur remained stable at INR 10,200/t ($122/t) exw.
  
  
• Billet prices in Raipur fall w-o-w: Billet prices in Raipur dropped w-o-w by INR 1,000/t to INR 39,450/t exw on 26 December. Prices declined by INR 500/t d-o-d. Paucity of deals at higher offers is putting pressure on prices in the region.
  
  

Outlook

Pellet prices may remain firm in the coming days as raw material (iron ore) prices have increased in the central and eastern regions after OMC's iron ore auction. However, price clarity will emerge after NMDC's price revision expected soon.