PELLEX Up at INR 6,150/MT Amid Active Trades

PELLEX increased to INR 6,150/WMT (DAP Raipur) amid active trade volumes. Two deals were reported in Raipur market in this publication window (with total traded quantity of 35,000 MT).

Raipur based pellet makers concluded deals of 25,000 MT and 10,000 MT at INR 6,000/MT (Ex-plant); normalizing for freight to Raipur at INR 6,150 (DAP Raipur).

One firm bid was reported at INR 5,950 (DAP Raipur). Three more bids reported at INR 5,650 – 5,750/MT (DAP Raipur) and have been excluded from the assessment. SteelMint P-DRI assessment (Sept 13, 2019) at INR 16,450/MT (Ex-Raipur) against INR 16,100/MT (Ex-Raipur) last week.

Exports indications for standard grade pellet (Fe 64%, Al 3%) stands at USD 92-93/MT, FoB India. In Raipur plants export realization stable at INR 5,200-5,300/WMT. Since the Export market is illiquid in Central India, the export realization factor has been ignored in the computation of PELLEX.

Considering the land cost of Lump and other factors like yield, conversion cost etc for NMDC and Orissa; the substitute parity price for Pellet is INR 6,120 (DAP Raipur). Since iron ore movement from NMDC and Odisha has slowed amid monsoons, Substitute parity factor has been ignored in the computation of PELLEX

Why PELLEX? India has installed pellet capaci1ty of 85 MnT pa and an annual production of around 65-66 MnT. 5 major states - Odisha (28.9 MnT), Karnataka (19.5 MnT), Chhattisgarh (9.6 MnT), Jharkhand (8.4 MnT) and Andhra Pradesh (8 MnT) - covers around 85-90% of the capacity. Based on the above we have chosen Raipur as our index base as this market seems more active from a domestic merchant trading perspective along with exports. Also, Chhattisgarh has a good base for sponge iron makers (DRI) who procure a decent amount of pellets.

These factors have led SteelMint to launch this index of PELLET on DAP Raipur basis.
The proposed specifications, along with delivery terms were devised following consultation with market participants. They are as follows:
1. Fe Content - Fe 63-64%
2. Combined Silica & Alumina - 7%
3. Trade Size - 2,500-10,000 MT
4. Payment terms - Advance

SteelMint will continue to monitor changes in the pellet markets and will adjust its methodology in accordance with the market participants.