India: PELLEX rises INR 200/t post NMDC price revision; weak steel market impacts demand

• Raipur offers rise by INR 200/t
  
  
• Buyers opt for wait-and-watch strategy
  
  

PELLEX, BigMint's bi-weekly domestic pellet (Fe 63%) index for Raipur, increased by INR 200/t to INR 9,600/t ($101/t) DAP on 9 June against 5 June.

Raipur pellet prices rose this week, with local pellet producers revising offers higher following NMDC's latest iron ore price hike.

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
  
  
• Four (4) deals were recorded in this publishing window, and two (2) were taken for calculation. Thus, the T1 trade category was accorded 50% weightage.
  
  
• Sixteen (16) firm offers, bids, and indicative prices were heard, and fourteen (14) were taken for price calculation and given the balance 50% weightage.
  
  

Price movements and offers

Pellet manufacturers in Raipur raised 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 after NMDC increased prices of iron ore fines and lumps by INR 150-200/t last week.

Around 55,000 t of pellet deals were concluded in Raipur at INR 9,100-9,650/t DAP by local and Odisha based pellet producers.

Market scenario

Market sources reported that several deals were concluded at revised offer levels, particularly by prominent pellet producers whose sales had remained largely closed during the previous week. The price increase was largely driven by higher raw material costs after NMDC revised iron ore prices upward.

However, the overall market sentiment remained cautious as downstream steel markets continued to face pressure. Sponge iron and billet prices have been on a declining trend, limiting the willingness of buyers to accept higher pellet prices.

A Raipur-based steelmaker said, "Buyers are currently in a wait-and-watch mode due to uncertainty regarding finished steel demand and price direction. Another steel producer noted that inventory accumulation in finished steel products has weakened market liquidity, which is further reflected in subdued raw material procurement activity."

Despite the cautious sentiment, some pellet sellers indicated that inquiries have emerged following the revised offers and some transactions have been concluded. However, market participants observed that buyer responses have slowed after the initial round of bookings at the new price levels.

A buyer commented, "The current price may limit further pellet purchases this week if the semi-finished market continues to show a downward trend."

Meanwhile, competitive supplies from Odisha continued to exert pressure on the Raipur market. Several transactions involving Odisha-origin pellets were reported at around INR 9,000-9,300/t DAP Raipur, offering buyers a cost-effective alternative to local material. The availability of lower-priced Odisha pellets has limited the extent of acceptance for local price hikes.

Market participants informed that the market is awaiting greater clarity on steel prices and demand conditions before taking aggressive procurement positions.

Key market drivers

• Sponge iron prices fall w-o-w: Sponge PDRI prices dropped by INR 250/t ($2.5/t) w-o-w to INR 24,200/t ($255/t) exw Raipur on 5 June. Sponge iron prices in the Raipur cluster declined by INR 100/t during the day as suppliers adjusted offers to improve market participation. Softer pricing encouraged improved booking activity across the region, resulting in improved trade volumes compared to previous sessions.
  
  
• Billet prices drop w-o-w: BigMint's billet index in Raipur fell by INR 200/t ($2/t) w-o-w to INR 38,650/t ($405/t) exw on 5 June. Meanwhile, the index inched down INR 50/t d-o-d. The market remained largely range-bound, supported by a modest improvement in buying activity in the semi-finished steel segment, although sentiment in the finished steel market continued to remain cautious.
  
  

Outlook

As per BigMint's analysis, while the recent offer revisions reflect higher production costs, pellet prices may remain under pressure in the near term amid weak steel market fundamentals, poor liquidity, and continuing downward trend in sponge iron and billet prices.