Domestic pellet prices continued their declining trend in May amid subdued buying, lower bids and discounts in the first half of the month. Sentiments weakened further after the government announced a steep 45% export duty on pellets in late-May.
The monthly average of SteelMint’s pellet index, PELLEX, stood at INR 10,020/t DAP Raipur in May, down by 16% m-o-m compared to April.
Prices across key markets-
- Raipur: Pellet prices fell sharply by INR 1,200/t m-o-m to INR 10,000-10,300/t exw in May.
- Bellary: Prices in Bellary moved down by INR 800/t to INR 9,200/t exw.
Barbil: Fe63% grade prices dropped by INR 2,000/t m-o-m to INR 8,000/t on loaded basis. - Jharsuguda: Pellet offers were assessed at INR 8,000/t, lower by INR 2,300/t compared to February.
- Jamshedpur: Prices stood at INR 8,000/t exw, decreasing by INR 2,300/t m-o-m.
- Kandla: Prices fell by INR 1,950/t to INR 13,200/t DAP basis.
Deals and trade
SteelMint recorded a total of around 219,500 t of pellet deals in May, a significant drop of 51% compared to April.
Key factors behind declining pellet prices
- Price cuts amid subdued demand: Following the drop in domestic steel billets and sponge prices, pellets producers also cut offers due to lower bids and weak demand amid limited enquiries for finished steel products. Buying interest picked up after price cuts as the bid-offer disparity narrowed down.
- Weak response in OMC iron ore auction: Odisha Mining Corporation (OMC) had scheduled an auction for 1.23 mnt of iron ore fines on 19 May 2022 in which, bids were received for 936,000 t (76%) only. The bid prices in the auction fell by INR 1,650/t against last month’s bid price. For this auction, the miner had also cut the base price by up to INR 800/t.Weak response in the OMC auction led to the fall in pellet prices.
- Export duty announcement: In a highly significant development on 21 May 2022, the government imposed hefty export duties on steel and steelmaking raw materials and intermediaries in a bid to preserve higher domestic supplies and control rising prices. A steep 45% duty was imposed on pellet exports.
This move turned the market upside down. Market participants are depressed over the sudden duty imposed last week and anxious on the future course of action.
Outlook
Domestic pellet prices are likely to correct further in days to come as the market is sluggish due to weak demand and sentiments.
To know more about, Indian iron ore & pellet market outlook
Iron ore and pellets conference: SteelMint Events will be hosting the 5th Indian Iron Ore & Pellet Summit on 3-4 August, 2022 at The Lalit, New Delhi. The conference will discuss key issues being faced by the iron ore and pellets industry in India. The focus will be on market dynamics, policy-related changes, growth challenges and enablers, sustainability and decarbonisation goals, the way forward and many more talk points.
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