India: PELLEX rises by INR 200/t ($2.5/t) amid strong trading activity

• Raipur offers rise amid uptrend in sponge, semis tags
  
  
• Higher Odisha offers make local deals more attractive
  
  

Pellet prices in the Raipur region rose by INR 200-300/tonne (t) over the weekend, supported by a rise in sponge PDRI and semi-finished steel prices last week, which prompted buyers to replenish inventories on need basis. This rebound comes after a prolonged phase of subdued market activity, during which Raipur-based buyers had largely avoided pellet purchases due to bearish market sentiments and low liquidity.

BigMint's bi-weekly domestic pellet (Fe63%) index increased by INR 200/t ($2.5/t) to INR 9,150/t ($108/t) DAP Raipur on 10 December compared to the previous assessment on 6 December. A Raipur-based producer concluded deals for 75,000 t of pellets (Fe63.5%) at revised offers of INR 9,300/t ($110/t) exw and 45,000 t of higher-grade material (Fe65%) at INR 10,500/t ($124/t) exw. Another sold 40,000 t of raw pellets at INR 9,000/t ($107/t) exw-Durg to buyers based outside of Raipur at revised offers.

The recent price rise reflects renewed demand, as steelmakers, facing raw material shortages, returned to the market for spot purchases. Some relaxation in offers by key pellet producers contributed to higher trade volumes, encouraging smaller buyers to re-enter the market. Additionally, higher offers from the Odisha region made local deals more attractive, with some plants diverting material to buyers outside Raipur.

A sponge maker stated, "Recent bulk deals boosted pellet trading volumes in the region. Additionally, it is still not feasible for us to procure material from Odisha-based sellers, as local offers for the higher grade are comparatively decent, and the delivery time is shorter."

However, a major steelmaker said, "Many market participants are holding off on bulk purchases until new iron ore prices are announced by NMDC Chhattisgarh, which will directly impact pellet production costs and offers."

At the recent NMDC Chhattisgarh iron ore auction, the entire 25,800-t DR-CLO (10-40 mm, Fe67%) lot was sold at INR 7,500-7,510/t against the base price of INR 7,480/t, while, out of the 12,000 t of Baila lumps (10-20 mm, Fe65.5%) offered, 10,000 t were booked at the base price of INR 6,860/t. However, the entire 107,500-t fines (Fe64%) lot remained unsold amid higher pellet production costs.

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
  
  
• Two (2) deals have been reported so far in this publishing window, and one (1) was taken for calculations. Thus, the T1 trade category was accorded 50% weightage and not considered for price calculation.
  
  
• Thirteen (13) firm offers, bids, and indicative prices were heard. Nine (9) were taken for price calculation and given the balance 50% weightage.
  
  

Factors driving PELLEX

• Sponge iron prices stable w-o-w: P-DRI prices remained largely stable w-o-w at INR 24,400/t ($287/t) exw-Raipur on 10 December. Meanwhile, prices fell by INR 250/t ($3/t) d-o-d today. Weakness in the semi-finished and finished steel segments led to lacklustre demand and, consequently, offer reductions. Nevertheless, an average number of transactions were seen today.
  
  
• Billet prices up w-o-w: Billet prices in Raipur inched up by INR 100/t ($1/t) w-o-w to INR 38,450/t ($453) exw today. Furthermore, d-o-d, prices fell by INR 200/t ($2.5/t).
  
  

Outlook

According to BigMint, the pellet market could remain volatile in the coming days, depending on inventory levels and broader price trends of the local and Odisha-based pellet producers.