India: Pig iron sales at SAIL auctions fall by over 40%, m-o-m, in Jan’22, prices rise steeply

Pig iron prices rose sharply at auctions conducted by state-owned steel producer SAIL in Jan’22 as domestic prices inched close to an all-time high on elevated coal and coke prices amid sustained domestic steel demand.

However, SteelMint data shows that sales volumes in Jan dropped by 43% compared with Dec to around 40,000 t. In Dec, SAIL had recorded an increase in sales by around 75% on a month-on-month basis to over 63,000 t.

Despite active participation in auctions during Jan, sales dropped on higher internal consumption by SAIL as finished steel realisations increased. Notably, sales at auctions fell in Q3 and Q4 of CY’21 compared to the previous quarters due to the rise in domestic merchant pig iron production.

As per SteelMint data, India’s merchant pig iron production reached 5.59 mn t in CY’21, higher by 34% compared to 4.17 mnt in CY’20. Total sales at SAIL auctions in CY’21 stood at over 0.66 million tonnes (mn t), data reveals.

Prices at record highs

Auctions in Jan witnessed a sharp surge in bid prices. Bid prices, for instance, increased by INR 5,280/t at the 3,000 t basic grade pig iron auction from the Bhilai Steel Plant (BSP) on 25 Jan compared to the previous auction on 6 Jan in which 6,000 t of pig iron had been booked at INR 38,750/t exw.

Similarly, an auction for 4,800 t of pig iron on 18 Jan from the Rourkela Steel Plant (RSP) saw the entire quantity getting booked at a weighted average price of INR 42,350/t exw, up INR 2,350/t in comparison with the previous auction from RSP on 12 Jan.

SteelMint calculated the weighted average price of steel grade pig iron from Bhilai at INR 41,300/t exw in Jan – higher by 10% vis-à-vis INR 37,660/t in Dec.

Pig iron prices increased in the range of INR 2,000-7,500/t in Jan across key markets in the country. SteelMint’s assessment for steel grade pig iron stood at INR 48,000/t exw Durgapur, eastern India, on 7 Feb – a rise of 17% m-o-m.

This steep rise in prices was fuelled by a 35% hike in seaborne hard coking coal prices during the month, while domestic metallurgical coke prices surged INR 8,000-10,000/t.

The possibility of prices softening in the supply-sensitive coking coal market remains limited in the near term and coke prices are expected to stay firm. In addition, supply pressure in the domestic market, especially in eastern India, is likely to keep pig iron prices strong amid rising steel prices in the country.