India: PELLEX falls by INR 50/t following decline in sponge iron, billet prices

• Sharp fall in sponge iron prices seen over last couple of days
• Buyers show preference for iron ore lumps due to cost viability

Pellet prices in the Raipur region remained under pressure this week following a sharp decline in sponge iron and billet prices, which weakened market sentiment across the downstream steel segment. Market participants indicated that buyers are currently cautious and refraining from making bulk pellet bookings amid uncertainty in semi-finished steel prices.

Trades and price movements

PELLEX, BigMint’s bi-weekly domestic pellet (Fe 63%) index for Raipur, decreased by INR 50/t to INR 11,100/t ($121/t) DAP on 13 March against 10 March. around 16,000 t of deals were recorded at INR 10,900-11,000/t exw Raipur by local pellet producers.

Producers kept offers for Fe 62.5-63% (+/-0.5%) grade pellets stable at INR 11,000/t ($119-120/t) exw.

Market dynamics

According to several market sources, trading activity has slowed, with only limited deals taking place. Steelmakers are largely adopting a wait-and-watch approach as they monitor the direction of sponge iron and billet prices before committing to larger procurement volumes.

A sponge iron producer based in Raipur said, “The sharp fall in sponge iron and billet prices over the past couple of days has created uncertainty in the market. Because of this most buyers are avoiding aggressive procurement and are instead focusing on managing existing inventory.”

Meanwhile, some buyers have started exploring alternative raw material options due to cost considerations. Market participants reported that a few sponge iron producers are procuring iron ore lumps from NMDC and nearby merchant miners, as the cost economics are currently more viable compared to pellet purchases.

One market participant explained, “Pellet prices are still relatively higher compared to iron ore lumps. Some buyers are booking lumps from NMDC and neighbouring regions because it is giving them better cost efficiency for sponge iron production.”

On the pricing front, buyers are currently seeking pellets at around INR 10,600/t exw, based on recent inquiries. However, sellers are reluctant to accept these levels and continue to keep their offers higher, resulting in a gap between bid and offer prices.

A supplier source said, “Buyers are trying to negotiate at around INR 10,600/t exw which is lower against current offers, but most sellers are not comfortable at that level yet. As a result, only limited transactions are happening in the market.”

Overall, trading activity in the Raipur market remained moderate, with no urgency from steelmakers to secure large volumes. Market participants expect prices to remain volatile in the near term, largely influenced by fluctuations in sponge iron, billet, and finished steel prices.

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
• Two (2) deal was recorded in this publishing window, and taken for calculation. Thus, the T1 trade category was accorded 50% weightage.
• Sixteen (16) firm offers, bids, and indicative prices were heard and eleven (11) were taken for price calculation and given balance 50% weightage.

Key market drivers

• Sponge iron prices decline w-o-w: Sponge PDRI prices fell by INR 1,050/t ($12/t) w-o-w on 10 March to INR 26,900/t ($291/t) exw-Raipur on 13 March. Sponge iron prices in the Raipur cluster declined by INR 200/t d-o-d, tracking muted buying interest and softer demand from billet producers. The DRI segment reflected cautious sentiment, with limited enquiries and restrained procurement.
• Billet prices down w-o-w: BigMint’s billet index decreased by INR 300/t ($3/t) w-o-w to INR 41,850/t ($453/t) exw-Raipur.  Prices fell by INR 300/t d-o-d today. Trading activity remained subdued throughout the session, with buyers largely refraining from fresh procurement amid persistent weakness in finished steel demand. The lack of downstream support pressured billet offers, prompting sellers to reduce spot prices in an attempt to stimulate trade. A few transactions were concluded toward the end of the day, though these were mainly need-based bookings at lower price levels, reflecting cautious participation.

Outlook

Pellet prices in Raipur are expected to remain volatile with direction of pellet prices will depend on how the semi-finished and finished steel markets behave. If steel prices stabilise, pellet demand may remain stable; otherwise, the market may continue to face pressure.