India: PELLEX falls by INR 100/t ($1/t) amid downward trend in steel market

• Trades at lower prices as against offers
• Semi-finished steel prices fall sharply w-o-w

PELLEX, BigMint’s bi-weekly domestic pellet (Fe 63%) index for Raipur, dropped by INR 100/t to INR 9,800/t ($101/t) DAP on 19 May (Tuesday) against 15 May. BigMint recorded a few deals totalling around 25,000 t, concluded at INR 9,500-9,950/t ($98-103/t) DAP-Raipur by local and Odisha-based producers. Although buying activity remained limited, the pace of correction slowed amid slightly improved sentiment in neighbouring sponge iron markets.

Prices witnessed a decline over the last couple of days amid weakened market sentiments, lower counter-bids from buyers, and continued pressure from the downstream steel sector.

Rationale

• PELLEX has been derived using data points, i.e., trades, offers, and bids. To download the detailed methodology, click here.
• Four (4) deal were recorded in this publishing window and three (3) were taken for calculation. Thus, the T1 trade category was accorded 50% weightage.
• Thirteen (13) firm offers, bids, and indicative prices were heard, and ten (10) were taken for price calculation and given the balance 50% weightage.

Trades and price movements

Offers for 62.5-63% (+/-0.5%) grade pellets were heard at INR 9,600-9,800/t exw Raipur, broadly stable compared to earlier levels. Market participants said that sluggish demand and cautious purchasing activity have pushed workable prices below the prevailing offers in the market.

A few local pellet producers concluded deals at discounts in order to maintain dispatches and liquidity. Buyers remained reluctant to book large volumes as sponge iron and semi-finished steel prices continued to weaken, impacting overall profitability for steelmakers.

Market scenario

Meanwhile, several buyers were heard booking material from Odisha-based pellet producers at around INR 9,500/t DAP Raipur, as competitive pricing from Odisha-based suppliers remained lower compared to Raipur-based offers. Sources said that the inflow of lower-priced material from Odisha has further intensified pricing pressure in the Raipur market.

A Raipur-based steelmaker said that market sentiments have turned weak due to continued correction in finished and semi-finished steel prices. He added that mills are currently purchasing raw materials cautiously and only based on immediate production requirements.

Another market participant stated that the recent reduction in iron ore base prices by Odisha Mining Corporation (OMC) for the upcoming auction has further impacted sentiments in the pellet market. OMC reportedly reduced iron ore base prices by around INR 200-1,100/t amid poor demand conditions and slower buying interest.

A sponge iron producer informed that workable pellet prices in the market are now lower than the current offers, as steelmakers are facing pressure from higher imported coal costs while realisations from finished steel products continue to decline. The participant added that buyers are expecting additional corrections in pellet prices if the downtrend in steel continues.

Key market drivers

• Sponge iron prices down w-o-w: Sponge PDRI prices decreased by INR 200/t ($2/t) w-o-w to INR 25,200/t ($260/t) exw Raipur on 19 May. Sponge iron prices in the Raipur cluster fell by INR 250/t d-o-d on 18 May as suppliers lowered offers to stimulate demand. Market participants reported moderate bookings during the day, supported by lower-priced material.
• Billet prices weaken by INR 750/t w-o-w: BigMint’s billet index in Raipur decreased by INR 750/t ($8/t) w-o-w to INR 39,500/t ($408/t) exw on 19 May. Meanwhile, the index declined by INR 350/t ($3.5/t) d-o-d. The index continued its downward trend with continuous corrections seen over the past few days, touching to a new four-month low. This significant decline underscores the ongoing pressures in the market, as weak demand and cautious market activity.

Outlook

Raipur pellet prices are likely to drop in the coming days, with better clarity on pricing trends likely to emerge after the conclusion of the upcoming OMC iron ore auction on 20 May.