- Sponge iron, billet prices fall INR 800-1,000/t w-o-w
- Buyers are in wait and watch mode amid weakening market
Pellet prices in the Raipur region continued to remain under pressure this week amid persistently weak demand and a sharp correction in downstream steel prices. The decline in sponge iron and billet prices has significantly impacted buying sentiment, prompting most market participants to adopt a cautious stance.
Trades and price movements
PELLEX, BigMint’s bi-weekly domestic pellet (Fe 63%) index for Raipur, inched down by INR 50/t to INR 10,500/tonne (t) ($116/t) DAP on 24 February compared to the previous assessment on 20 February. Around 5,000 t of pellet (Fe 63%) were traded in the market at INR 10,300/t ($114/t) exw-Raipur.
Raipur-based pellet producers kept offers stable for Fe 62.5-63% (+/-0.5) grade pellets at INR 10,400-10,500/t ($115-116/t) exw. Recent decreases in sponge iron and billet prices made buyers cautious, further impacting the trading volume of pellets in Raipur.
Market dynamics
According to market participants, the steep fall in sponge iron and billet tags has squeezed margins for secondary steelmakers, reducing their appetite for pellets at prevailing offer levels. A sponge producer said, “With sponge iron and billet prices correcting sharply over the past few days, it is difficult for us to procure pellets at current offers. Our finished steel realisations have dropped, so raw material procurement must align accordingly.”
Buyers are largely in a wait-and-watch mode and are not in a hurry to close fresh deals. Several sources indicated that negotiations are ongoing, with buyers seeking discounted rates from pellet producers. In some pockets of the market, limited transactions have been concluded at lower price levels, reflecting the prevailing bearish sentiment.
A buyer noted, “There are a few deals happening, but mostly at discounted prices. Buyers are bargaining hard as they anticipate further corrections in pellet offers.” However, pellet producers are reportedly maintaining their existing offer levels despite weak inquiries. Market participants observed that overall inquiries have declined compared to previous weeks.
On the supply side, producers are attempting to hold prices steady, but mounting pressure from subdued demand and falling downstream steel prices may compel revisions if the trend continues.
Another buyer informed, “If sponge iron and billet prices do not stabilise, pellet producers may have to reconsider their offers. We are expecting some drop in the prices in the near term.”
Market participants expect Raipur pellet prices to remain under downward pressure in the near term, amid weak market sentiment and continued volatility in downstream steel segments.
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.
- Twelve (12) firm offers, bids, and indicative prices were heard. Nine (9) were taken for price calculation and given balance 50% weightage.
Key market drivers
- Sponge iron prices fall w-o-w: Sponge iron prices declined by INR 800/t ($9/t) w-o-w on 24 February to INR 26,500/t ($291/t) exw-Raipur. Prices in Raipur inched down by INR 400/t d-o-d. Sponge iron prices in Raipur are pressured by muted demand and competitive offers from neighbouring markets. The correction in DRI prices offered limited relief, as billet realisations declined more quickly.
- Billet prices decline w-o-w: BigMint’s billet index decreased by INR 1,000/t ($11/t) w-o-w to INR 40,000/t ($440/t) exw-Raipur. Meanwhile, prices declined by INR 500/t d-o-d today. Despite steep reductions in spot offers, buying interest remained moderate. Sellers were compelled to lower prices aggressively amid persistent lower bids and negative cues from the finished steel segment. The sharp correction triggered panic-selling in parts of the spot market, further weighing on price realisations. A few deals were concluded at reduced levels, largely on a need-based basis, as participants remained cautious ahead of upcoming festive-related transport disruptions.
Outlook
Pellet prices in Raipur may decline as buyers are cautious to procure material at the current offers and bids are lower in market.
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