India: PELLEX remains stable despite sharp drop in sponge PDRI prices

• Market remains cautious ahead of OMC's iron ore auction on 18 Apr
  
  
• Producers struggle to pass on rising costs from higher iron ore prices
  
  

Pellet prices in the Raipur region remained largely stable on 17 April despite a sharp drop inpellet-based sponge iron (PDRI) prices, as a downward correction in offers helped revive some buying interest in an otherwise cautious market environment.

Trades and price movements

PELLEX, BigMint's bi-weekly domestic pellet (Fe 63%) index for Raipur, remained unchanged at INR 10,600/t ($115/t) DAP on Friday compared to 14 April. BigMint recorded deals for around 50,000 t, concluded at INR 10,400-700/t ($112-116/t) exw-Raipur by local pellet producers.

Raipur-based pellet producers kept offers for Fe 62.5/63% (0.5%) material stable at INR 10,400-10,500/t exw. Few Odisha-based pellet producers offered pellets to Raipur-based buyers at INR 10,200-10,400/t DAP Raipur, but no deals were recorded in the last couple of days.

Market dynamics

According to pellet manufacturers, the reduction in offers helped improve trade activity. A pellet producer said, "We received some interest from buyers after revising our offers. Buyers who were holding back earlier stepped in to procure limited quantities." However, overall sentiment remained guarded, with buyers avoiding bulk procurement.

Buyers, particularly from the sponge iron and semi-finished steel segments, highlighted ongoing weakness in downstream markets as a key reason for their cautious approach. A steelmaker stated, "Sponge iron and semi-finished steel prices are still under pressure. We are only purchasing raw materials on a need basis and avoiding inventory buildup." This restricted aggressive buying, keeping demand subdued despite stable pellet pricing.

Meanwhile, market attention has shifted toward the upcoming Odisha Mining Corporation (OMC) auction scheduled for 18 April. Several steelmakers and traders are adopting a wait-and-watch strategy ahead of the auction outcome. A source informed BigMint, "The OMC auction will set the tone for iron ore prices, which will eventually influence pellet prices as well."

Adding to the complexity, iron ore prices have continued to show an upward trend, creating a cost push for pellet producers. However, stagnant demand continues to cap pellet prices, leaving producers unable to pass on rising costs and keeping the market range-bound.

Sources also noted that inquiries remained limited, with no signs of aggressive buying emerging. A trader noted, "There is interest, but it is not translating into firm demand. Buyers are still hesitant given the volatility in finished steel prices."

In NMDC Chhattigarh's auction on 16 April, 17,200 t of DR CLO (10-40 mm, Fe 67%) were sold at an INR 2,470/t premium over base prices of INR 5,950/t, while 6,000 t of ROM (10-150 mm, Fe 65.5%) were sold at base prices.

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
  
  
• Three (3) deals were recorded in this publishing window, and two (2) were taken for calculation. Thus, the T1 trade category was accorded 50% weightage.
  
  
• Fourteen (14) firm offers, bids, and indicative prices were heard, and ten (10) were taken for price calculation and given the balance 50% weightage.
  
  

Key market drivers

• Sponge iron prices fall w-o-w: Sponge PDRI prices dropped sharply by INR 700/t ($8/t) w-o-w to INR 25,900/t ($288/t) exw Raipur on 17 April amid weak demand. Similarly, semi-finished and finished steel demand remained sluggish, with only a few deals concluded. Buyers largely stayed on the sidelines, restricting procurement to immediate needs. Overall sentiment remained cautious, resulting in muted trading activity.
  
  
• Billet prices drop w-o-w: BigMint's billet index in Raipur declined by INR 1,050/t ($11/t) w-o-w and fell by INR 200/t ($5/t) d-o-d to INR 41,900/t ($453/t) exw on 17 April. Market sentiment remained soft, driven by weak downstream demand and tepid enquiries. Despite minor price adjustments in select trades, buyers largely maintained a wait-and-watch approach amid uncertainty over near-term demand recovery.
  
  

Outlook

According to BigMints analysis, the direction of pellet prices hinges on the upcoming OMC auction results. Market participants expect that a definitive shift in iron ore pricing or a resurgence in buying interest could lead to improved trading activity in pellets. In the interim, the Raipur pellet market is projected to maintain a stable yet cautious stance.