India: PELLEX falls by INR 200/t ($2/t) post decline in OMC iron ore auction bids

• Raipur producers reduce offers by INR 200/t
  
  
• Sponge iron and billet prices continue to drop
  
  

PELLEX, BigMint's bi-weekly domestic pellet (Fe 63%) index for Raipur, dropped by INR 200/t to INR 9,600/t ($98/t) DAP on 19 May (Tuesday) against 15 May. BigMint recorded a few deals totalling around 10,000 t, concluded at INR 9,500/t ($97/t) exw-Raipur by local producers. Although buying activity remained limited amid weak market momentum.

Pellet prices in Raipur witnessed a decline of around INR 200/t over the last couple of days amid weakening market fundamentals, lower iron ore auction bids, and continuous pressure on sponge iron and billet prices. However, in May a correction of INR 500-600/t in prices in Raipur has been seen so far. Market participants said the bearish sentiment across the steel value chain has significantly impacted pellet trading activity, while buyers remained cautious due to uncertain price trends.

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
  
  
• One (1) deal were recorded in this publishing window and was taken for calculation. Thus, the T1 trade category was accorded 50% weightage.
  
  
• Sixteen (16) firm offers, bids, and indicative prices were heard, and fifteen (15) were taken for price calculation and given the balance 50% weightage.
  
  

Trades and price movements

Pellet manufacturers in Raipur reduced offers for Fe 62.5/63% (+/-0.5%) grade pellets by INR 200/t ($2/ t) to INR 9,400-9,500/t ($98-99/t) exw. The price correction was primarily driven by subdued demand and weaker sponge iron prices. Additionally, a decline of up to INR 700/t ($7/t) m-o-m in weighted average bids during the iron ore fines auction from the Odisha Mining Corporation (OMC) further pressured pellet offers.

Raipur-based pellet producers reduced their offers in response to weak demand and falling raw material prices. However, despite the correction in offers, market inquiries remained limited and no aggressive trades were reported in the market. Traders and suppliers noted that buyers are largely adopting a wait-and-watch approach amid expectations of further corrections in pellet prices.

Market scenario

A Raipur-based pellet producer said, "The current market conditions are extremely challenging as finished steel demand remains weak and liquidity pressure is affecting the entire supply chain. The producer added that even after lowering offers, buyers are still hesitant to conclude deals due to expectations of additional price declines."

Meanwhile, the recent sharp decline in bids during the OMC iron ore auction has further weakened market sentiment. Market participants mentioned that lower iron ore bids clearly indicate poor confidence among steelmakers and raw material buyers. The correction in iron ore prices has also increased pressure on pellet prices, particularly in secondary steelmaking regions like Raipur.

A buyer informed, "Pellet demand has weakened substantially because sponge iron and billet prices have continued to decline over the past few weeks, affecting steelmakers margins."

A sponge iron manufacturer mentioned that the finished steel market is not performing well and mills are currently focusing on maintaining liquidity instead of aggressive raw material procurement.

Another buyer said that Odisha-based pellet offers have become increasingly competitive after recent price corrections, forcing Raipur producers to reduce their offers as well. Some buyers also revealed that they had recently procured iron ore lumps and therefore were not actively purchasing pellets at current levels.

Key market drivers

• Sponge iron prices drop w-o-w: Sponge PDRI prices decreased by INR 950/t ($10/t) w-o-w to INR 24,750/t ($260/t) exw Raipur on 19 May. Sponge iron prices in the Raipur cluster fell by INR 200/t d-o-d on 22 May as suppliers lowered offers to stimulate demand. Market participants reported limited bookings during the day, supported by lower-priced material.
  
  
• Billet prices weaken by INR 1,250/t w-o-w: BigMint's billet index in Raipur decreased by INR 1,250/t ($12/t) w-o-w to INR 38,800/t ($408/t) exw on 22 May. Meanwhile, the index declined by INR 250/t ($2.5/t) d-o-d. Market participants said enquiries remained limited and largely centred on lower price expectations, prompting mills to trim offers to secure bookings. Negative sentiment from neighbouring markets further dampened trade activity.
  
  

Outlook

Raipur pellet prices are likely to remain under pressure in the near term unless there is a recovery in finished steel demand and improvement in overall market liquidity.