Steel Market Update: Sponge Iron Market Declines And Indian Pellet Industry Takes A Hit

The Indian Pellet industry has reported a downtrend due to limited inquiries and an unsupported Sponge Iron market in India. This has led to an excess of supply over demand in the spot market, resulting in a slowdown in raw material purchases, such as Pellets and Iron Ore. In this article, we will explore the same.

Factors Putting Pressure On Pellet Industry

• Declined Sponge Iron Prices- Sponge Iron is the key product that impacts the Pellet industry and it has recorded a significant downward price correction. The current prices are hitting a low since November 2022. The price decline has led to a negative trend in Pellet prices, which have fallen by Rs 200-500/ton depending on the location, with a significant drop of Rs 300-500/ton in Raipur, week-on-week, Ofbusiness assessed.

• Strong Iron Ore Supply- In the domestic market, Iron Ore supply remains strong with seasonal improved availability. However, Iron Ore demand continues to be low, resulting in the last auctions floated by OMC receiving a lack of response against expectations. Additionally, NMDC has kept its prices downtrend for upcoming auctions by Rs 100-300/ton.

• Lower Export Realizations- The Pellet export prices also moved in a downtrend, and indicative prices being reported around $95-100/ton FOB basis, a week-on-week decline of $5/ton. Weak Chinese demand is weighing on export demand, resulting in a fall in domestic prices too.

Current Prices

• Pellet-based Sponge Iron- Current offers are hovering at Rs 28,100-28,200/ton ex-works in Raipur.

• Fe 63% Pellets- Currently, offers are being floated at approximately Rs 8,700-8,900/ton ex-Raipur, Rs 8,400-8,500/ton ex-Kharagpur, and about Rs 9,000-9,100/ton ex-works in Durgapur.

• The limited demand has forced Indian Pellet producers to offer discounts depending on the quantity, with suppliers offering slight discounts if there are inquiries for bulk orders.

Market Outlook

Considering the slowdown in Steel demand and exports due to sluggish trends globally, the participants in the Indian market believe there is less scope for price recovery. Globally, the sharp price fall of Coal has also indicated less support for Steel prices, which may ultimately keep prices soft.

OFB’s Insight

The Indian Pellet market is facing a tough situation due to limited inquiries and an unsupported Sponge Iron market in the country. The price decline has led to a negative trend in prices, with limited purchases of raw materials. The strong supply of Iron Ore and the low demand has resulted in a lack of response to the last auctions floated by OMC. The participants in the market believe there is less scope for price recovery in the future, considering the slowdown in Steel demand and exports due to sluggish trends globally.

Read more: Week 18 Of 2023: Indian Steel Industry Plummets, Will Traders See a Turn-Around?

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