SteelMint: PELLEX sees trade volumes rise to 14-month high of nearly 240,000 t in Dec'21

SteelMint's domestic pellet index for the Raipur market in central India, PELLEX, witnessed a sharp surge in total trade volumes by nearly 150% month-on-month to 239,500 tonnes (t) in Dec'21 from under 100,000 t in Nov.

SteelMint data shows that volumes touched a 14-month high in Dec as total monthly pellet trades had last recorded such high levels in Oct'20.

On year-on-year basis, traded volumes rose by close to 120% compared with 109,000 t in Dec'20.

Rising sponge iron prices

Compared to a 14% m-o-m drop in trade volumes in Nov, trading in Dec increased on rising steel and sponge iron prices. Pellet-based sponge iron (P-DRI) prices in Raipur inched up to nearly INR 31,000/t towards end-Dec from INR 27,000-28,000/t levels throughout the month.

Prices rose on higher billet prices in the induction furnace steel market as well as slight supply shortage.

Again, in the beginning of Dec, pellet sourcing by buyers based in Raipur increased due to a momentary glitch in supply of iron ore lump used for making pellets from state-owned NMDC due to a fire incident at one of its conveyor belts at the 10 mn t/year Deposit 5 in Chhattisgarh. However, the impact on supplies was temporary.

Price scenario

Pellet prices increased by about 12% from a multi-month low of INR 9,500/t exw Raipur in early-Dec to INR 10,700/t on 31 Dec. SteelMint assesses the weighted average price of pellets (Fe 63%) at INR 10,172/t in Dec - down by around 11% from INR 11,500/t in Nov.
However, prices inched up somewhat in Dec on the sharp rise in trades as well as an uptick in pellet export sentiments. Global iron ore prices have bounced back to around $120/t CFR China from below $90/t on restocking demand in China, which has had a positive effect on the Indian pellet exports market.

This provides the immediate upside to prices. However, NMDC has slashed iron ore prices by INR 300-500/t for Jan'22 off the back of falling prices in Odisha amid increasing iron ore supplies in the market.

In addition, steel prices are likely to remain range-bound in the short term, with the primary producers rolling over prices for Jan. Pellet exports, too, are unlikely to witness any major rise till Mar'22 when the Winter Olympic Games end in China.

Therefore, pellet prices are not expected to increase much in the short term, SteelMint notes.

PELLEX

Pellex monitors the dynamics of India's largest merchant pellet market - Raipur. Along with recording sales and offers from Raipur-based producers, the index also tracks deals concluded by pellet producers based in other major markets of the country - Odisha, Karnataka and western India - for sponge iron manufacturers in Raipur. It is a mathematically precise index aiming to provide accurate price assessment for traders.