India: PELLEX remains largely stable amid weak market momentum

• Pellet trade subdued due to weak sentiment
• NMDC’s price revision has minimal impact on trade

The pellet market in Raipur remained largely firm this week despite declining offers for sponge iron-based pellets and subdued demand of local buyers. Buyers are increasingly favouring local pellets, as shipments from Odisha have tapered off. While prices in both regions are currently pricing at comparable levels, preference is shifting to locally available material.

NMDC has decreased list prices of iron ore CLO (calibrated lump ore) and fines. The miner has fixed prices of DR CLO (10-40 mm, Fe 67%) at INR 7,050/t ($82/t) and of iron ore fines (-10 mm, Fe 64%) at INR 5,350/t ($62/t), a decrease of INR 150-160/t ($2/t). Prices are on FOR basis from its Bacheli complex and include royalty, DMF and NMET.

Price movements

PELLEX, BigMint’s bi-weekly domestic pellet (Fe63%) index for Raipur,  remained unchanged at INR 9,250/t ($108/t) DAP Raipur on 6 June compared to the previous assessment on 3 June. Raipur-based pellet makers kept their offers firm for Fe 62/63% (+/_0.5%) material at INR 9,100-9,200/t ($106-107/t) exw-Raipur on 6 June.

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.

Market sentiments

At the beginning of this week, decent trade volumes were recorded. However, over the past few days, trade activity remained negligible, as the downstream sector grew more sluggish and finished steel prices continued to remain under pressure.

A buyer commented, “We are now closely observing sentiment following NMDC’s latest price revision as there is an expectation that pellet producers will lower their rates in the coming days in response.”

Most industry participants are reluctant to engage in bulk transactions, as there is disparity between bids and offers. The lack of bulk orders and the absence of bullish indicators underscore the market’s pessimistic mood.

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
• No deal has been reported so far in this publishing window and not taken for calculations. The T1 trade category was accorded 0% weightage.
• Thirteen (13) firm offers, bids, and indicative prices were heard. Ten (10) were taken for price calculation and given a balance of 50% weightage.

Key market drivers:

• Sponge iron tags fall d-o-d: P-DRI prices fell by INR 300/t (4/t) w-o-w to INR 23,300/t ($272/t) exw-Raipur on 6 June. Meanwhile, prices dropped by INR 100/t ($1/t) d-o-d. Weak demand and falling downstream prices have weighed on sponge iron prices.
• Billet prices down d-o-d: Billet prices in Raipur decreased by INR 350/t ($4/t) w-o-w to INR 38,600/t ($450/t) exw today. Prices saw a downtrend of INR 200/t ($2/t) d-o-d.

Outlook

According to BigMint’s analysis, prices of pellets in Raipur are likely to remain volatile in the coming days. This is because trading is expected to remain subdued unless there is a visible rebound in sponge iron and billet prices.