Limited Demand Weigh On Indian Pellet Industry- Will It Bounce Back?

The Indian pellet industry is facing challenging times due to the limited demand for sponge iron. It has led to less demand for raw materials such as pellets and iron ore. The mid-sized steel makers are waiting for clear market directions before placing bulk orders for raw materials, leading to low buying interest in the prevailing market for pellets. In this article, we will highlight the current situation, its impact on the industry, and its outlook.

Current Situation: Price And Trade

• Fe 63% Pellets- Currently, Fe 63% pellets are being offered at around Rs 9,700-9,900/ton ex-Raipur and about Rs 9,800/ton ex-works in Durgapur, with only a few deals being reported. As per the sponge iron producers in Raipur, trade discounts are available if pellets are booked in bulk. However, the producers are holding their inventories of both sponge iron and pellets, waiting for a clearer direction in the market to make future orders. This is to manage their books amidst ongoing uncertain price trends.

• Drop-In Offers- Furthermore, pellet-based sponge iron offers in Raipur have dropped by Rs 500/ton week-on-week and are currently reported at around Rs 30,200-30,400/ton ex-works. With the dip in offers, demand remained limited with local suppliers due to competitive offers from outstate-based plants and sufficient stock with the ingot, and billet manufacturers. This has resulted in limited purchases of pellets and iron ore by sponge iron makers.

Future Outlook

Despite the current challenges faced by the Indian pellet industry, there are positive indications of growth in the future. The government’s focus on the infrastructure sector and the push towards increasing manufacturing output could boost demand for steel, which in turn could increase the demand for pellets. The upcoming fund allocations of the budget could also bring in policies to support the steel industry, which could have a positive impact on the pellet industry.

Moreover, the Indian pellet industry has significant growth potential due to the country’s abundant reserves of iron ore, low labour costs, and skilled workforce. The industry can leverage these factors to improve efficiency, reduce costs, and increase competitiveness in the global market.

Insight

The Indian pellet industry is heavily reliant on demand from the steel sector, and the limited demand for sponge iron has impacted the industry negatively. The mid-sized steel makers are hesitant to place bulk orders for raw materials until clear market directions are established, resulting in low buying interest for pellets. The uncertain price trends have made it challenging for the industry to make any significant investments.

The current market conditions have led to a drop in prices for Fe 63% pellets, with only a few deals being reported. This situation has created a challenging environment for the pellet industry in India.

Read more: Indian Steel Prices Experienced Volatility In Week 12 Of 2023; Finished Steel Sales Limited