India: PELLEX drops INR 300/t ($3/t) as Raipur producers slash offers

• Weakened inquiries lead to a drop in pellet offers
  
  
• Semi-finished steel prices fall by INR 1,000-1,100/t w-o-w
  
  

Pellet prices in the Raipur region declined by INR 300-400/t as assessed on 14 April, as local producers revised their offers downward in response to weakening market fundamentals. The correction follows last week's price increase, when producers had raised offers in line with higher iron ore prices announced by NMDC and Lloyds Metals for April deliveries. However, the market failed to sustain those elevated levels due to subdued buying interest.

Trades and price movements

PELLEX, BigMint's bi-weekly domestic pellet (Fe 63%) index for Raipur decreased by INR 300/t ($3/t) toINR 10,600/t ($114/t) DAP on Tuesday, compared to 10 April, Friday, reflecting softer market conditions. BigMint recorded deals of around 25,000 t concluded at INR 10,400-500/t ($112-113/t) exw Raipur by local pellet producers. Moreover, around 10,000 t deals were recorded from Odisha-based suppliers in Raipur at INR 10,200/t ($110/t) DAP.

Raipur-based pellet producers reduced offers for Fe 62.5/63% (0.5%) material by INR 300/t to INR 10,400-10,500/t exw, reflecting weakening market sentiment. Decline in pellet prices comes despite an earlier hike of INR 450-550/t in iron ore prices by NMDC Chhattisgarh. Meanwhile, cuts were expected to boost market sentiment and promote greater trade volumes for fresh procurements.

Market dynamics

Market participants indicated that buyer activity slowed significantly at higher price points, prompting sellers to reassess their pricing strategies. A pellet producer said, "We saw resistance from steelmakers when prices were increased last week. Inquiries dropped sharply, and inventories started building up."

This lack of demand, combined with declining trends in the sponge iron and semi-finished steel segments over the past week, added further pressure on pellet makers to reduce their offers.

Steelmakers witnessed similar sentiments, noting visible sales pressure in the Raipur market. A sponge iron manufacturer informed, "Pellet plants are receiving limited inquiries at previous price levels. Buyers are cautious and only procure on a need basis." This cautious stance is largely attributed to sufficient inventory levels and uncertain downstream demand.

Additionally, competitive pricing from Odisha-based pellet producers has intensified pressure on local suppliers. Market sources highlighted that material from Odisha is currently available at relatively lower prices, making it a more attractive option for buyers. A market source said, "A few deals have been concluded with Odisha-based suppliers in Raipur, and their offers were cheaper compared to local prices. This has led to some pressure on pellet prices in Raipur. Meanwhile, prices of sponge iron and billets have also dropped sharply, further impacting market sentiments."

Despite the bearish sentiment, some transactional activity has been observed at revised price levels. A few plants have booked material to meet immediate requirements, while several deals remain under negotiation and are expected to conclude by mid-week.

Sources also said moderate trading activity in the coming days, supported by selective procurement and continued use of iron ore lumps by some plants for cost optimization.

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
  
  
• Three (3) deal was recorded in this publishing window, and two (2) were taken for calculation. Thus, the T1 trade category was accorded 50% weightage.
  
  
• Seventeen (17) firm offers, bids, and indicative prices were heard, and fourteen (14) were taken for price calculation and given the balance 50% weightage.
  
  

Key market drivers

• Sponge iron prices fall w-o-w: Sponge PDRI prices sharply dropped by INR 1,100/t ($12/t) w-o-w to INR 26,450/t ($284/t) exw Raipur, reflecting downtrend market momentum. Sponge iron prices in the Raipur cluster fell by INR 400/t d-o-d, weighed down by muted demand and competitive offers from neighbouring markets. The correction in DRI prices offered limited relief, as billet realisations declined at a faster pace.
  
  
• Billet prices drop w-o-w: BigMint's billet index in Raipur declined by INR 1,000/t ($11/t) w-o-w and fell by INR 450/t ($5/t) d-o-d to INR 42,550/t ($457/t) exw on 14 April. Market participants noted that continued weakness in finished steel consumption remains the primary driver behind the ongoing correction. A Raipur-based trader said, Even after substantial price cuts, buying confidence is low, and volumes remain thin on lack of support from the downstream segment.
  
  

Outlook

We expect pellet prices in Raipur to remain stable in the near term. Market participants are closely watching the upcoming OMC auction, which could provide further direction to raw material prices. Moreover, any sharp movement in steel prices will likely influence pellet market dynamics in central India.