- Raipur prices drop by INR 200/t ($2.5/t)
- Lower offers encourage trading activity
Pellet prices in the Raipur region saw a downward revision this week, driven by sluggish trading activity and weakening fundamentals in the local steel market. Market sources confirmed that sellers, facing mounting sales pressures, have lowered offers to encourage buying interest amid weakened demand.
PELLEX, BigMint’s bi-weekly domestic pellet (Fe63%) index for Raipur, dropped by INR 150/tonne (t) ($2/t) to INR 9,400/t ($110/t) DAP Raipur on 23 May compared to the previous assessment on 16 May.
Around 15,000 t of pellet deals were concluded by Raipur sellers at the revised offers of INR 9,100 ($107/t) exw. Meanwhile, 10,000 t of pellets were booked by Raipur buyers at INR 9,350/t ($110/t)DAP from Odisha suppliers. Buyers actively booked required material at the lower offers, which further led to maintaining trade activity in this publishing window.
Raipur-based pellet makers reduced their offers for Fe 62.5-63% (+/_0.5%) material by INR 200/t ($2.5/t) to INR 9,100-9,300/t ($107-109/t) exw today. The recent m-o-m drop in bids at the OMC fines auction and weaker market sentiments led to a fall in pellet offers. Meanwhile, competitive offers from Odisha also contributed to the drop in Raipur’s tags.
Pellet offers (Fe 62.5-63%) from Odisha for Raipur-based buyers were heard at INR 9,000-9,300/t ($106-109/t) DAP, and transactions were limited in the last couple of days.
One of the primary factors behind the price correction has been the underwhelming outcome of the recent Odisha Mining Corporation (OMC) iron ore auctions. Coupled with a notable decline in sponge iron and semi-finished steel prices in Raipur, the overall sentiment in the market has turned bearish.
A buyer informed, “The drop in sponge and billet prices in May has squeezed margins, and buyers are resisting pellet prices that don’t align with the reduced input costs.”
Adding to the downward pressure are competitive pellet offers from Odisha and increased usage of NMDC DR-CLO lumps, which several secondary producers see as cost-effective alternatives. A sponge producer added, “We’re seeing better value in using NMDC lumps at the current pricing. Pellet demand is naturally subdued as a result.”
Market participants are bracing for further volatility, with buyers staying cautious amidst the prevailing uncertainty. A supplier, speaking on the current market dynamics, said: “We don’t expect strong demand recovery in the short term. Buyers are hesitant to build inventory with current sales being so weak.”
Rationale
- PELLEX has been derived using data points, ie, trades, offers, and bids. To download the detailed methodology, click here.
- Two (2) deals were reported so far in this publishing window, and both were taken for calculations. The T1 trade category was accorded 50% weightage.
- Fifteen (15) firm offers, bids, and indicative prices were heard. Eleven (11) were taken for price calculation and given a balance of 50% weightage.
Factors impacting pellet prices
- Sponge iron tags drop d-o-d: P-DRI price fell by INR 50/t (0.5/t) d-o-d to INR 24,150/t ($283/t) exw-Raipur on 20 May. Meanwhile, prices remained stable w-o-w. Today, market participants remained away from buying.
- Billet prices fall d-o-d: Billet prices in Raipur dropped by INR 50/t ($0.5/t) d-o-d to INR 39,850/t ($467/t) exw today. W-o-w, prices saw a straight line with no changes. Today’s decline was primarily driven by sluggish demand in both semi-finished and finished steel segments. While a few transactions were recorded at lower price levels, the overall lack of support from the finished steel market led to increased caution among participants.
Outlook
As per BigMint’s analysis, pellet prices in central India are likely to remain volatile amid the uncertain market sentiments and cautious bids from buyers for the pellet restocking.
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