Pellet trade volumes in the domestic market rose by 21% m-o-m to 617,900 tonnes (t) in January 2024 compared to 512,700 t in December 2023, according to data maintained with BigMint.
Factors driving up domestic pellet trade volumes:
- Hike in lumps offer: OMC had conducted an auction for around 3 mnt of iron ore on 19 January, 2024 in which 2.6 mnt of iron ore got booked by the buyers out of which 1.048 mnt were lumps and 1.524 mnt comprised fines. Need-based buying was seen in the auction amid a shortage of high-grade material due to the exhaustion of environmental clearances (ECs). However, bids for fines increased by INR 100-1,100/t against those seen in December 2023 while bids for lumps increased by INR 50-1,400/t against those for December 2023.
- Ore availability low: In the last two months, iron ore lumps availability in the market has been quite low owing to exhausted ECs at merchant miners’ end. As per BigMint data, ECs have already been exhausted by 75-90%.
- Subdued export demand: Domestic mills were focused on sales in the domestic market rather than exports. Chinese steelmakers avoided booking premium material amid poor steel margins at home. India pellet makers, on the other hand, realised better margins in the domestic market an and hence avoided exports following sluggish demand in overseas markets.
- Pellet Production increases 4% in Jan’24: Pellet production in India for the month of January 2024 also increased by 4% to 8.3 mnt compared to 7.96 mnt in December 2023.
Pellex overview
The monthly average of BigMint’s domestic pellet index, PELLEX, was assessed at INR 9,850/t, edging down by INR 100/t m-o-m in January. The fall in Pellex resulted from the price reduction at local plants in Raipur.
Sponge market overview
Sponge PDRI prices in Raipur fell by INR 300/t m-o-m to INR 26,750/t while in the majority of regions, prices dipped by INR 100-1,100/t m-o-m in January. Prices decreased in January because buyers preferred to procure at lower offers while demand for finished steel was also low.
Outlook
Pellet trade volumes in February 2024 are expected to remain volatile following the sluggish approach from buyers amid poor margins as sponge and finished steel offers are projected to move southwards.