India: Pellet trade volumes drop 40% m-o-m in Sep'23

Pellet trade volumes in the domestic market fell by 40% m-o-m to 458,550 tonnes (t) in September 2023 compared to 763,500 t in August, according to data maintained with SteelMint.

Factors driving lower trade volumes

• Some plants undergo maintenance shutdown: The shutdown of several key pellet plants this month has had a noticeable impact on both pellet production and trade, leading to a decrease compared to August. A few pellet plants in central, eastern, and southern India were temporarily closed for maintenance. The rainy season presented challenges for both pellet and sponge makers, resulting in reduced production and sales of raw pellets.
  
  
• Logistical constraints: During September, the rainy season led to logistical challenges, notably transportation delays. The heavy monsoon rains led to operational hurdles for sponge makers, subsequently impacting the availability of materials.
  
  
• Higher pellet offers on higher iron ore prices: In the domestic market, pellet prices experienced an uptick, rising by INR 850-1,200 per tonne across all regions, except in southern India’s Bellary region, where prices had already been elevated in August. The surge in pellet offers occurred in September, coinciding with the monsoon season, as plants fulfilled previous contracts and iron ore prices surged. It is worth noting that miners encountered operational challenges due to waterlogging caused by heavy rains. Additionally, the Odisha Mining Corporation (OMC) conducted an auction for 2.25 million tonnes of iron ore fines (Fe 54-62%) in September, leading to bids increasing by up to INR 850 per tonne for all lots, surpassing the floor prices. Notably, in the auctions held in July, August, and September, the entire volume was fully booked. This spike in bidding activity contributed to the rise in pellet prices in the central and eastern regions.
  
  

Pellet prices increase

Domestic pellet prices exhibited a upward trend in September. Prices across key markets rose by 9% m-o-m. The monthly average of SteelMint’s domestic pellet index, PELLEX, was assessed at INR 10,350/t, up 12% m-o-m in August as compared to INR 9,250/t /t in July. Increased iron ore prices from miners such as OMC, NMDC and some private miners from Odisha supported domestic pellet prices.

Increase in sponge PDRI prices in Raipur, Durgapur, Barbil, Jamshedpur and Raigarh has supported pellet prices in the domestic market.  Sponge makers booked raw pellet on need basis amid higher offers from pellet makers.

Outlook

Pellet trade will increase in the coming months as production and demand will increase post-monsoon.