Why Is Pellet Industry In India Struggling?

The Indian Pellet industry is facing a difficult time due to limited demand for Sponge iron, resulting in decreased demand for raw materials such as Pellets and Iron Ore. The mid-sized Steel makers in India are reluctant to place bulk orders for raw materials until market directions become clear, which has led to low buying interest for Pellets in the current market. In this article, we will explore the ongoing trends of the Pellet industry in India.

Current Prices And Trade

• Fe 63% Pellets- Presently, Fe 63% Pellets are being offered at approximately Rs 9,200-9,300/ton ex-Raipur, Rs 9,300/ton ex-Kharagpur, and about Rs 9,800/ton ex-works in Durgapur. In Raipur, suppliers are experiencing limited demand, whereas in Durgapur producers are reporting average demand, resulting in relatively stable prices compared to the previous week. However, in Raipur, prices have fallen by Rs 300-400/ton, week-on-week.

• Sponge Iron- According to sponge iron manufacturers in Raipur, the lifting of materials is not very active, and future orders are limited, resulting in a delay in purchasing raw materials. Sponge iron prices in Raipur have also decreased by around Rs 300-500/ton week-on-week and Rs 1,000-1,200/ton, month-on-month in response to low demand, although in Durgapur, there was only a slight change of Rs 100-200/ton in a week’s time.

Current Situation

Sources reported to Ofbusiness that limited demand for sponge iron has impacted the Pellet industry in India, which depends heavily on the mid-sized (secondary) Steel sector for demand. Mid-sized Steel makers in India are hesitant to place bulk orders for raw materials until clear market directions are established, resulting in low buying interest for Pellets. Uncertain price trends in the current market have made significant investments challenging, leading to a drop in Fe 63% in Pellet prices, with only a few deals being reported.

Market Outlook

Participants in the Indian Pellet industry are anticipating low to average demand as Steel demand is expected to remain uncertain due to volatile prices in the global market, especially in China, which accounts for over 60% of the world’s Steel production. Iron Ore prices in China continue to remain under pressure due to concerns over further Chinese government intervention in the market and subdued Steel demand in the county.

The National Development and Reform Commission (NDRC) recently met with several futures companies in Beijing to discuss Iron Ore market prices, which has led to market sentiment being adversely affected by concerns over the government’s crackdown on speculative market activities that have been blamed for rising prices.

OFB’s Insight

The Indian Pellet industry is struggling with limited demand for sponge iron, resulting in decreased demand for raw materials. This has led to low buying interest for Pellets in the current market. The uncertain price trends have made significant investments challenging, leading to a drop in Fe 63% Pellet prices. The mid-sized Steel makers are hesitant to place bulk orders until market directions become clear. The participants in the industry are anticipating low to average demand as Steel demand is expected to remain uncertain due to volatile prices in the global market.

Read more: Is Weakening Steel Demand Putting Pressure On Ferrous Scrap Industry In India?

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