India: PELLEX holds firm, deals remain under pressure

• Buyers well stocked amid recent bookings from NMDC
  
  
• Sponge PDRI, semi-finished steel prices decrease w-o-w
  
  

Raipur's pellet market was sluggish this week amid muted buying interest. Sellers maintained their offers, but buyers exercised caution, preferring to wait in expectation of potential price corrections.

PELLEX, BigMint's bi-weekly domestic pellet (Fe63%) index for Raipur, remained stable at INR 9,800/tonne (t) ($115/t) DAP Raipur on 13 May compared to the previous assessment on 9 May. Raipur-based pellet producers kept offers for Fe 63% (+/- 0.5%) stable at INR 9,600-9,700/t ($113-114/t) exw. Raipur seller concluded around 20,000 t (Fe62%) and 15,000 t (Fe65%) pellet deals at INR 9,500/t ($111/t) and INR 11,000/t ($129/t) exw, respectively.

However, no major deals were concluded by other local sellers amid weak market sentiments following bid-offer disparities. Meanwhile, inquiries also slowed, as only need-based demand was present.

Pellet offers (Fe 62.5-63%) from Odisha for Raipur buyers were heard at INR 9,000-9,600/t ($106-113/t) DAP, and some transactions took place due to the competitive pricing. In this publishing window, deals for around 5,000 t of pellets (Fe 62.5%) were concluded by Raipur buyers at INR 9,000/t ($105/t) DAP from an Odisha-based supplier.

A market participant stated, "There is a general market expectation that pellet offers may decline in the coming days. That is why most buyers are refraining from fresh procurement."

Market participants indicated that sponge iron producers are currently well-stocked, having recently secured sufficient quantities of iron ore from the National Mineral Development Corporation (NMDC). This factor also led to minimal fresh buying activity in the spot market.

A sponge iron manufacturer said, "We had already booked pellets and DR-CLO from NMDC last week, so at this moment, we are not looking to make any fresh purchases. Following the current downtrend in the steel prices, market confidence is low for pellet purchases."

Adding to the pressure is weak sentiment in the sponge iron and semi-finished steel markets. Prices in these segments were under pressure due to sluggish demand, which in turn impacted pellet consumption and deals.

Looking ahead, participants expect the market to remain volatile. Much depends on upcoming developments, including the iron ore auction from the Odisha Mining Corporation (OMC) next week, which could offer some price clarity.

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
  
  
• Two (2) deals were reported so far in this publishing window, one (1) was taken for calculations. The T1 trade category was accorded 50% weightage.
  
  
• Nineteen (19) firm offers, bids, and indicative prices were heard. Sixteen (16) were taken for price calculation and given the balance 50% weightage.
  
  

Factors impacting pellet prices

• Sponge iron tags drop: P-DRI prices declined by INR 400/t ($5/t) d-o-d to INR 24,200/t ($284/t) exw-Raipur on 13 May. Meanwhile, prices decreased by INR 300/t ($4/t) w-o-w. Prices of sponge iron fell, as market participants remained cautious in the face of a declining steel market and a lack of inquiries.
  
  
• Billet prices fall: Billet prices in Raipur fell by INR 450/t ($5/t) d-o-d to INR 39,900/t ($468/t) exw today. W-o-w, prices dropped by INR 350/t ($4/t). Deals were absent in today's trading session.
  
  

Outlook

As per BigMint's analysis, Raipur's pellet prices are expected to stay under pressure until there is a shift in market sentiment. Trade activity may remain moderate in the rest of the week as competitive offers from Odisha remain an attractive alternative for steelmakers.