Pellet Buying Hampered Over Weak Demand & Declining Lump Prices

Pellet buying across India has suffered a set back over reduced buying from pellet sponge manufacturers and cheaper lump offers.

As a result of which, many pellet makers prominently in eastern India have closed merchant pellet sales and are running plant at reduced capacities only for captive purpose.

Factors with which Indian pellet industry is struggling with:

1. Decline in domestic lump prices whereas fines prices remain unchangedSerajuddin Mines, one of the major merchant iron ore miners in Odisha has cut lump (Fe 63%) prices by INR 150/MT to INR 2,150/MT (ex-mines & inclusive of Royalty). Declining lump prices have made lump attractive over pellet compelling sponge iron makers to shift to lump. On the other hand, fines prices are yet to notice any significant reduction over which pellet (Fe 63%) prices in Barbil continue to remain at INR 3,000/MT (loaded to wagons) amid limited buying.

Also, NMDC in its recent price revision has reduced lump prices by INR 300-360/MT but fines prices remain unmoved at INR 1,560/MT (excluding taxes , DMF, and Royalty). Raipur pellet prices remain stable at INR 4,300-4,400/MT (basic) with limited buying.

On similar lines, private miners in Karnataka have also cut lump prices in iron ore e-auctions. For instance, bid prices for lump (Fe 60.5%) offered by Vedanta (formerly known as Sesa Sterlite) was sold at INR 1,630/MT (basic) in Oct’15. But the bid prices of the same material grade & type has fallen to INR 1,350/MT (basic) in Nov’15. Pellet prices in Bellary are currently hovering in the range of INR 4,300-4,400/MT (basic) for Fe 63% pellets.

1. Further drop in pellet sponge prices:

Downtrend in prices of pellet sponge continues. In eastern India P-DRI prices have fallen by INR 600/MT W-o-W and in central India they have fallen by upto INR 800/MT W-o-W.

1. Imported lump offers fall further, west India pellet prices down by INR 200/MT W-o-W

With global iron ore prices hitting years low imported lump offers to India continue to pressurize domestic pellet prices in western India. Jindal SAW has cut pellet prices by INR 200/MT W-o-W and are at INR 4,300/MT (delivered Kandla).

Indian Pellet Prices as on 01 Dec’15

Basic prices in INR/MT
* loaded to wagons
**delivered
Source: SteelMint Research