India: PELLEX drops by INR 300/t ($3/t) amid muted buying interest

• Raipur producers reduce pellet offers by INR 300/t last week
• Rising stocks, competitive offers from Odisha weigh on sentiment

PELLEX, BigMint’s bi-weekly domestic pellet (Fe 63%) index for Raipur, decreased by INR 300/t to INR 9,300/t ($98/t) DAP on 16 June against 12 June.

Pellet prices in the Raipur region witnessed a sharp correction of INR 300-400/t during the past week as local pellet producers revised their offers downward amid rising inventories and subdued buying activity from steelmakers.

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 and was taken for calculation. Thus, the T1 trade category was accorded 50% weightage.
• Nineteen (19) firm offers, bids, and indicative prices were heard, and eighteen (18) were taken for price calculation and given the balance 50% weightage.

Price movements and offers

Raipur-based pellet producers reduced their offers for Fe 62.5/63% pellets by INR 300/t ($3/t) to INR 9,100-9,200/t ($96-97/t) exw on 13 June. This correction was driven by sluggish demand and constrained liquidity, which pressured the sellers to revise prices lower.

One deal for around 5,000 t of pellets was recorded by BigMint in this publishing window, concluded by a local pellet producer at INR 9,100/t exw Raipur.

Market scenario

Market participants stated that higher stocks at pellet plants, coupled with cautious procurement strategies adopted by steel producers, exerted significant pressure on pellet prices. Buyers have largely restricted purchases to immediate operational requirements, while bulk procurement activity remains absent from the market.

A Raipur-based pellet producer stated, “Inventory levels have increased considerably over the past few weeks as demand from sponge iron and steel producers remains weak. To improve liquidity and encourage transactions, several producers were compelled to lower their offers.”

Adding to the pressure, competitive pellet supplies from Odisha-based suppliers have intensified competition in the Raipur market. The attractive offers from Odisha have provided buyers with alternative sourcing options, limiting the ability of local suppliers to maintain previous price levels.

A steelmaker commented, “Finished steel demand remains sluggish, and inventories of downstream steel products have accumulated across the market. Under such circumstances, aggressive raw material procurement is not viable. Most plants are purchasing pellets strictly on a need basis.”

The weakness in the semi-finished steel segment has further dampened market sentiment. Participants indicated that declining prices of sponge iron and billets have reduced profitability for steelmakers, leading to cautious raw material buying decisions.

Despite the recent correction in offers, trading activity remained largely muted at revised price levels, with no major bulk deals reported over the last couple of days. Market participants are currently awaiting the upcoming Odisha Mining Corporation (OMC) iron ore auction scheduled for 19 June, which is expected to provide clearer direction regarding raw material availability and pricing trends.

Key market drivers

• Sponge iron prices fall w-o-w: Sponge PDRI prices dropped by INR 150/t ($1.5/t) w-o-w to INR 24,050/t ($254/t) exw Raipur on 16 June. Prices rose by INR 50/t d-o-d. While enquiry levels were moderate and deal closures remained selective, sellers largely maintained a stable stance amid ongoing market uncertainty. The finished steel segment also witnessed cautious buying activity, though regular trade flow continued.
• Billet prices rise w-o-w: BigMint’s billet index in Raipur rose by INR 150/t ($1.5/t) w-o-w to INR 38,800/t ($405/t) exw on 16 June. Additionally, the index inched up INR 100/t d-o-d. The marginal uptick was supported by the recent announcement of an industrial power tariff hike from the Chhattisgarh State Electricity Regulatory Commission. Overall, although semis demand remained weak, a modest improvement in finished steel demand was observed today, which contributed to the price uptick d-o-d.

Outlook

BigMint expects pellet prices to remain under pressure in the near term. Buying activity is expected to stay selective and slow as steelmakers continue to monitor downstream market conditions and await the outcome of the OMC auction before taking significant procurement decisions.