India: PELLEX drops INR 250/t ($3/t) after NMDC price cut; buyers resume inquiries

• NMDC trims iron ore prices by INR 500-650/t ($6-8/t)
• Raipur producers slash pellet offers by INR 300/t today

Pellet prices in Raipur dropped by INR 300/t ($3.5/t) today following NMDC’s revision in iron ore prices. The reduction has triggered active buying, especially from mills that were previously hesitant due to elevated raw pellet offers.

India’s largest merchant iron ore mining company, NMDC, decreased list prices of iron ore CLO (calibrated lump ore) and fines for July. The miner has fixed prices of DR CLO (10-40 mm, Fe 67%) at INR 6,400/tonne (t) ($75/t) and of iron ore fines (-10 mm, Fe 64%) at INR 4,850/t ($57/t), a decrease of INR 650/t ($8/t) and 500/t ($6/t), respectively. Prices are on FOR basis from the miner’s Bacheli complex and include royalty, DMF and NMET.

Price movements

PELLEX, BigMint’s bi-weekly domestic pellet (Fe63%) index for Raipur, fell by INR 250/t ($3/t) to INR 8,900/t ($104/t) DAP Raipur on 1 July compared to the previous assessment on 27 June.

Raipur-based pellet producers cut offers for Fe 62/63% (+/_0.5%) material by INR 300/t ($3.5/t) to INR 8,700-8,800/t ($102-103/t) exw. The price reduction followed NMDC’s price cut for iron ore and poor sentiments in the sponge iron and semi-finished steel markets.

Around 65,000 t of deals were recorded in Raipur concluded by the local sellers at revised offers. The deals were heard concluded at INR 8,700-8,800/t exw.

Pellet (Fe 62.5-63%) offers from Odisha for Raipur buyers were heard at INR 8,600-9,200/t ($100-107/t) DAP.  Meanwhile, 10,000 t of pellets was booked recently from Odisha.

Market scenario

Market participants informed that the revised offers have made purchases viable for those looking to fulfil immediate needs, although bulk buying activity is still limited. A buyer said, “With the current price levels of sponge iron, the correction in pellet prices offers brings some relief. Our losses will be slightly lower now, but we expect further reductions from local producers.”

On the supply side, some producers reported increase inquiries post the price drop. A pellet producer said, “We have started receiving active inquiries since the price revision and have accepted a few orders.”

Market sources informed that NMDC’s revision has created a ripple effect in the market, with expectations of another round of price correction by Raipur-based pellet manufacturers. A market participant said, “The sharp iron ore price cut by NMDC may push more suppliers to revise their offers.”

As the monsoon has already set in, seasonal demand is expected to improve. Market participants believe that while prices may remain volatile in the near term, trade volumes may rise as sponge iron manufacturers look to capitalise on softer raw material costs.

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 reported in this publishing window and all were taken for calculations. The T1 trade category was accorded 50% weightage.
• Twelve (12) 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 up w-o-w: P-DRI prices inched up by INR 150/t ($2/t) w-o-w at INR 22,400/t ($261/t) exw-Raipur on 1 July. Meanwhile, prices remained stable d-o-d. The prices were showed a uptrend today but deals were largely muted amid the cautious stance by the buyers.
• Billet prices down w-o-w: Billet prices in Raipur decreased by INR 150/t ($2/t) w-o-w to INR 36,900/t ($431/t) exw today. Prices saw a fall of INR 100/t ($1/t) d-o-d. Spot offers witnessed minor downward adjustments, though a slight improvement in semi-finished steel demand was observed. Buyers opted for need-based procurement, as muted sales in the finished steel segment kept them cautious.

Outlook

According to BigMint, pellet prices are expected to remain volatile in the near term. Buyer interest will increase later on as restocking of pellets is still pending by sponge iron producers in the region.