India: PELLEX drops by INR 150/t ($2/t) in bearish market

• Local pellet producers cut offers by around INR 200/t
• Sponge PDRI, billet tags fall by INR 500-1,000/t w-o-w

Raipur pellet prices witnessed a notable drop of INR 200-300/tonne (t) ($2.5-3.5/t) this week, driven by continued bearish sentiment across the sponge iron and finished steel markets. Local pellet producers responded swiftly to the downtrend by slashing their offers by INR 200/t ($2.5/t) today, but the market response remained lukewarm, with limited deals and sluggish buyer participation.

Price movements

PELLEX, BigMint’s bi-weekly domestic pellet (Fe63%) index for Raipur, fell by INR 150/t ($2/t) to INR 9,250/t ($108/t) DAP Raipur on 30 May compared to the previous assessment on 27 May.

Raipur-based pellet makers reduced their offers for Fe 62/63% (+/_0.5%) material by INR 200/t ($2.5/t) to INR 9,000-9,100/t ($105-106/t) exw-Raipur on 30 May.

Pellet (Fe 62.5-63%) offers from Odisha for Raipur-based buyers were heard at INR 8,800-9,000/t ($103-105/t) DAP. A limited volume of material was booked from these in the last couple of days.

Trade activity

Raipur based pellet producer sold 10,000 t raw pellets at INR 9,100/t ($106/t) exw to local buyers. Around 10,000 t of pellets (Fe63%) were booked by Raipur buyers at INR 9,000/t ($105/t) DAP from Odisha.

Market sentiments

A buyer informed BigMint, “Despite the drop in offers, buyers were reluctant. Declining steel prices are forcing them to adopt a wait-and-watch approach.” A persistent fall in sponge iron prices further added to the pessimism in the market.

Adding to the pressure, pellet prices from Odisha remained increasingly competitive, attracting interest from Raipur-based buyers. A source stated, “We managed to secure some small-volume deals from Odisha producers at more attractive prices. This inter-regional buying trend has slightly offset the otherwise subdued market activity.”

However, some Raipur-based sellers opted to hold back offers due to low inquiry levels and market uncertainty. A pellet producer noted, “There is no point in pushing material when buyers are not showing interest. We are waiting for price clarity.”

Market participants expect continued price pressure in the near term as demand remains subdued. With downstream steel products struggling to find price stability, raw material segments like pellets are likely to remain under stress.

Of 189,200-t Baila fines (Fe 64%), around 51,000 t were sold at base price INR 5,500/t on 29 May. Notably, iron ore fines received bids for the first time in the last 4-6 months.

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, and one (1) was taken for calculations. The T1 trade category was accorded 50% weightage.
• Fifteen (15) firm offers, bids, and indicative prices were heard. Thirteen (13) were taken for price calculation and given a balance of 50% weightage.

Key market drivers:

• Sponge iron tags drop d-o-d: P-DRI prices fell by INR 550/t (6/t) w-o-w to INR 23,600/t ($276/t) exw-Raipur on 30 May. Meanwhile, prices dropped by INR 100/t ($1/t) d-o-d. Amid weak demand, sponge inventory increased, leading to price cuts. Meanwhile, transaction volumes were average today.
• Billet prices fall d-o-d: Billet prices in Raipur dropped by INR 900/t ($11/t) w-o-w to INR 38,950/t ($455/t) exw today. Prices saw a downtrend of INR 100/t ($1/t) d-o-d.

Outlook

As per BigMint’s analysis, the market is unlikely to witness an immediate recovery given current trends. Prices may stay weak until there is a revival in steel demand.