Indian sponge iron prices hit an all-time high on 1 Mar’22 since 2010, the period from which SteelMint has been maintaining its data. C-DRI (lump based) prices, exw-Raipur, spiralled up to INR 39,000/t, while P-DRI (pellet based) rates touched INR 38,200/t exw.
Reasons for higher sponge iron prices:
- Hike in iron ore prices: Iron ore is a key raw material for sponge players. Odisha iron ore fines prices jumped INR 300/tonne (t) to a four-month high of INR 6,200/tonne, buoyed by the recent geo-political conflict that is dragging up global iron ore. Limited availability of high grade ore as well as rakes has fanned the high prices. The 5-18-mm lumps index also touched a high of INR 10,400/t, in tandem with fines.The Odisha sentiments influenced NMDC to raise iron ore prices from its Chhattisgarh mines further by up to INR 680/t. Fines offers rose by INR 300/t and DR-CLO by INR 680/t.
SteelMint’s bi-weekly domestic pellet (Fe 63%) index, PELLEX, was stable w-o-w at INR 12,650/t DAP Raipur on 25 Feb’22. However, as EU buyers seek prompt cargoes from India, pellet export offers may rise and prop up domestic prices.
- Elevated coal prices: Portside prices of South African RB2, a grade predominantly used by sponge iron manufacturers, have been rising due to limited supply and rakes availability. Constrained coal stocks at power plants forced domestic miner Coal India to redirect supply to the power plants, leaving the non-power sector with little option but to wait till supply stabilizes. Supply issues from Indonesia continued to fuel the rally in South African prices. RB2 was being offered at a premium of $5/t.
Several European countries were heard booking South African coal amid expectations of tight LNG supply from Russia in the wake of its war with Ukraine.
- Rising steel prices: Billet prices in Raipur hit an all-time high on 28 Feb’22 as producers cited higher coal and other raw material prices along with lower rakes availability. SteelMint’s daily billet index was assessed at INR 51,600/t, up by INR 2,000/t-exw-Raipur.
- Uptrend in scrap prices: Domestic as well as imported scrap prices showed an uptrend. Domestic scrap prices rose by a whopping INR 900/t yesterday, The sharp rise in ingots/billets prices and the conversion spread impact pushed up scrap.
Meanwhile, rising billet prices lent support to imported scrap prices. Global offers edged up $5-10/t.
Short-term outlook
Raw material prices are not likely to decline in the short term especially against the backdrop of the Russia-Ukraine war which is sending natural gas prices northward. Thus, sponge prices may remain on the higher side in the short term.
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