India: PELLEX drops INR 50/t ($0.5/t) amid weak steel prices and subdued buying

• Raipur sellers keep similar offers, deals are muted in market
• Buyers swaits for OMC auction to get price clarity for further deals

Pellet prices in the Raipur region continued to face pressure in the week ended 16 December as trading activity remained muted amid a sustained decline in sponge iron and semi-finished steel prices. According to market participants, despite sellers maintaining their offer levels, buying interest for pellets has remained weak, keeping overall market sentiment cautious.

Price movements, trades

PELLEX, BigMint’s bi-weekly domestic pellet (Fe63%) index for Raipur, decreased by INR 50/t ($00.5/t) to INR 9,400/t ($103/t) DAP on Tuesday compared to the previous assessment on 12 December. Trading activity in Raipur remained limited, with major sellers failing to conclude deals over the past few days. Meanwhile, sponge iron continued their downward trend, recording a decline of around INR 400/t on a week-on-week basis, further weighing on pellet demand.

Around 10,000 t of pellets (Fe 62.5%, low-phosphorous) were sold by a local supplier at INR 9,600/t exw Raipur. Raipur-based producers kept their offers for 62.5/63% (+/-0.5%) material stable at INR 9,300-9,600/t ($102-106/t) exw recently. Meanwhile, some Odisha-based sellers offered at INR 9,500-10,000/t DAP in Raipur.

Market scenario

As per market sources, sponge iron manufacturers are increasingly using iron ore CLO as a raw material due to its cost-effectiveness. A market player said, “Sponge makers are comfortably feeding CLO as it offers better costing in the current margin scenario, which is further restricting pellet demand. This shift in raw material preference has tightened the pellet market and limited fresh trades.”

Suppliers echoed similar concerns, stating that counterbids from buyers are largely absent. A pellet producer informed, “We are not getting any workable counter-bids from buyers. The steel market itself is under pressure, so steel mills are avoiding fresh commitments.”

A few sources also highlighted that previously booked pellet deals are still pending lifting, as buyers already have sufficient iron ore CLO inventory and are operating under tight margins in pellet, sponge iron, and CDRI production.

Another buyer said the market is currently in a wait-and-watch mode ahead of the upcoming OMC auction scheduled later this week. He added, “Clarity may emerge post the OMC auction. Pellet offers could see some correction depending on the auction bids, and only then will buyers reassess their procurement plans.”

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
• One (1) deal was recorded in this publishing window, not taken for calculation. Thus, the T1 trade category was accorded 0% weightage.
• Fourteen (14) firm offers, bids, and indicative prices were heard. Twelve (12) were taken for price calculation and given a balance of 100% weightage.

Key market drivers

• Sponge iron prices fall w-o-w: Sponge iron prices sharply dropped by INR 400/t ($4/t) w-o-w on 16 December to INR 22,700/t ($250/t) exw-Raipur. However, prices rose by INR 200/t ($2/t) d-o-d. Market offers moved higher on a d-o-d basis, though actual buying activity remained largely need-based, reflecting continued buyer resistance at elevated price levels. While enquiry volumes showed some improvement, the conversion rate into confirmed trades remained limited.
• Billet prices firm w-o-w: BigMint’s billet index increased by INR 150/t ($1.5/t) w-o-w to INR 36,600/t ($403/t) exw-Raipur on 16 December. Prices rose by INR 250/t (3/t) d-o-d. The market sustained gains during today’s session as improved buying interest in the prior trading day encouraged sellers to raise spot offers. However, activity remained limited at higher price levels, as buyers had already secured sufficient volumes in the earlier session. Consequently, participation was limited, with only selective transactions reported amid elevated offers.

Outlook

According to BigMint’s analysis, pellet prices are expected to remain largely rangebound in the near term. Trade momentum and price direction are likely to become clearer after the outcome of the OMC auction.