Sponge iron demand has slightly weakened in the Indian domestic market owing to fall in production of furnaces due to shrinking margins. Since the beginning of this week, no major deals have been reported in Raipur & Durgapur, which are one of the major sponge producing markets, with around 40-50 units each.
Currently the conversion stands at INR 9,500-10,000/t in Raipur, Durgapur & Rourkela, from sponge P-DRI to billet. The power tariff in these respected markets hovering at INR 6.00-7.00/unit, depending upon load factor. In order to produce a ton billet about 800 units of power is consumed.
Few steel plants (including hot rolling mills) in Raipur, Durgapur & Rourkela also confirmed further drop in production by 20-30% in Sep. There is no immediate improvement in margins, but expect a gradual drop in sponge prices on falling consumption.
Similarly in pig iron, major merchant suppliers in eastern India reported no healthy orders. Hence they are offering a discount of INR 100-300/t for quantity of above 500 t bookings.
Recent auctions floated by SAIL from Bokaro Steel Plant for 2,850 t on 9 Sep, got cancelled due to no participation. Also, a Jajpur based pig iron producer reported no fresh deals on floated offers of INR 28,000/t exw & the last deals reported at INR 27,500-27,700/t exw, about a week ago.
Outlook
Industry sources are hopeful that domestic sponge iron & pig iron prices may stabilize or gradually come down with improved availability in major locations.
However, if the scarcity of raw material (i.e. Iron ore & Pellets) continues to remain in the merchant market, the sponge producers may push up prices to pass higher input cost.
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