India: Pellet prices decrease by up to 26% in June on subdued sentiments

Domestic pellet prices were mostly on a downward trend in June. Weak demand, declining offers, limited trade and price cuts by NMDC weighed on the material, with prices dropping by up to 26% in June.

SteelMint’s pellet index, PELLEX, fell sharply by INR 2,090/t m-o-m to INR 10,020/t /t exw-Raipur in June as against May.

Prices across key markets-

• Raipur: The monthly average Fe 63% pellet prices fell by INR 2,380/t m-o-m to INR 8.240/t exw in June.
• Bellary: Prices in Bellary moved down by INR 1,210/t to INR 8,780/t exw last month.
• Barbil: Monthly average Fe63% grade prices dropped by INR 2,410/t m-o-m to INR 6,980/t on loaded basis.
• Jharsuguda:Pellet offers were assessed at INR 7,300/t, lower by INR 2,130/t compared to May.
• Jamshedpur: Average prices stood at INR 7,280/t exw, decreasing by INR 2,010/t m-o-m.
• Kandla: Prices fell by INR 2,280 /t to INR 12,660/t DAP basis.

Factors pushing down pellet prices-

• Domestic demand subdued, but recover later: Demand for pellets in the domestic market remained weak till mid-month with limited trade seen as buyers were anticipating further correction in prices. Pellet prices have been on a downtrend since the government announced a 45% duty on exports of the material.

However, towards late-June, buying interest returned as prices were lower along with the onset of monsoon which shifted the consumers’ interest from iron ore to pellets. Surprisingly, healthy volumes were booked in the last ten days of June.

SteelMint recorded a total of around 778,250 t of pellet deals in June, more than 3.5 times compared to 219,500 t in May.

• Major players reduce offers: Key pellet players in the major markets significantly lowered their offers in June on weak buying interest. Raipur-based Godawari Power and Ispat Ltd (GPIL) resumed pellet offers for domestic buyers. The company reduced prices twice in the month by a total of INR 1,000/t. However, it raised prices by INR 400/t towards end-June as demand recovered.
• NMDC lowers iron ore prices for June: State-owned iron ore miner slashed lump ore prices by INR 1,320/t and fines by INR 1,100/t for June deliveries. This was about 20-25% lower from the last price announcement which was made on 25 May 2022.
• Weak response in iron ore auctions: State-run Odisha Mining Corporation held an auction for 1.55 mnt of iron ore fines and 1.23 mnt of lumps from its mines on 23 June. Out of the total quantity on offer, only 89,000 t of fines (less than 6%) and 77,000 t of lumps (6%) received bids.

On the other side, NMDC’s Chhattisgarh iron ore auctions in June also failed to fetch any response. The miner had conducted two auctions – (i) for 109,200 t of Fe 64%-67% (indicative) grade material from its Bacheli mines, and (ii) for 67,200 t of Fe 64-65.5% (indicative) grade ore from the Kirandul mines.

• Odisha index prices downtrend: Odisha iron ore fines (Fe 62%) index decreased sharply by INR 1,710/t m-o-m to INR 3,290/t exw-mines in June.

Outlook

Domestic pellet demand has picked up with the onset of monsoon. Buyers have shifted to buying pellets in place of iron ore due to high moisture content in the latter during the rainy season. It is expected that the domestic pellet market will continue to remain active in the days to come.