India: PELLEX rises by INR 500/t ($6/t) post-increased premiums in OMC auction

• Raipur offers rise by INR 500/t ($6/t) this week
  
  
• Falling sponge, billet prices impact pellets sales
  
  

Pellet prices in central and eastern India surged following the recent OMC auction, where m-o-m premiums exceeded INR 1,000/tonne ($12/t) -- significantly increasing manufacturing costs of the same. In response, major pellet plants in Odisha raised their offers by INR 500-700/t ($6-9/t), while Raipur witnessed a similar increase of INR 500/t ($6/t).

BigMint's bi-weekly domestic pellet (Fe63%) index increased by INR 500/t ($6/t) to INR 10,500/t ($125/t) DAP Raipur on 22 October compared to the previous assessment on 18 October. Raipur-based producers sold around 10,000 t of pellets (Fe63.5%) at INR 11,000/t ($137/t) exw at the revised prices in this publishing window.

However, the market remains subdued due to bid-offer disparities and a recent decline in sponge iron and billet prices. This led buyers to hold back on new purchases, further weakening market activity. Producers, on the other hand, waited for fresh buying inquiries but met with limited demand.

Some producers from Odisha offered pellets at INR 10,300-10,700/t ($123-127/t) DAP to buyers in Raipur but no deals were struck due to differences in bids and offers. Since buyers had already bought the material at lower prices a few days ago, they chose to wait and see due to the weak market dynamics in the downstream steel segments.

A buyer said "The steel market is currently under pressure as prices for finished steel have dropped, leading to a decrease in sentiments. With the Diwali festival approaching, trading activity is expected to remain low especially since buyers are cautious in the current scenario. The short-term outlook is uncertain, with low demand prevailing."

Factors driving PELLEX

• Pellet offers up in Raipur: Raipur-based pellet makers raised their offers for iron ore Fe 63% (+/_0.5%) on 21 October by INR 500/t ($6/t) to INR 10,400-10,500/t ($124-125/t) exw, following a corresponding hike by Odisha-based producers. Godawari Power & Ispat (GPIL) opened pellet offers for Fe63% and Fe65% grades at INR 11,000/t ($131/t) and INR 12,200/t ($145/t) exw respectively.
  
  
• Sponge iron prices fall w-o-w: Sponge P-DRI prices sharply dropped by INR 1,400/t ($17/t) w-o-w to INR 26450/t ($315/t) exw-Raipur on 22 October. Meanwhile, prices fell by INR 550/t ($7/t) d-o-d. Demand was impacted by sluggish movement in the semi-finished and finished steel segments, which led to further reductions in offers.
  
  
• Billet prices decline w-o-w: Billet prices in Raipur declined by INR 1,700 ($20/t) w-o-w to INR 39,550/t ($470/t) exw and by INR 550/t ($7/t) d-o-d. The billet index dropped sharply today amid lack of trading interest in the market.
  
  

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
  
  
• One (1) deal was reported in this publishing window and taken into account for price calculation and accorded a 50% weightage for T1 trade.
  
  
• Twenty-two (22) firm offers, bids, and indicative prices were heard. Nineteen (19) were taken for price calculation and given the balance 50% weightage.
  
  

Outlook

Pellet prices in Raipur are expected to remain stable as sellers are holding their offers at current levels. However, there may be an absence of deals due to reduced buying interest ahead of the Diwali festival.