Sponge iron trade volumes in the domestic market were recorded lower in October compared to that seen in September, as per SteelMint data. The sluggish sentiments in the domestic market and price volatility throughout the month weighed on trade volumes.
Not only this, sponge iron prices across major markets decreased marginally in October m-o-m. The fall in prices was mainly due to lower bids, limited buying and a decline in steel prices in key markets.
Factors weighing on sponge iron trade volumes and prices
- Dull enquiries: Buying enquiries remained limited as market participants adopted a cautious approach amid volatile price trends. There was widespread uncertainty on price swings. Buyers lowered their bids and ordered only the material they needed.
- Semis, steel prices largely stable: Semi-finished as well as finished steel prices remained range-bound m-o-m in October. SteelMint’s billet index stood at INR 47,570/tonne (t) last month, almost stable m-o-m. Similarly, prices of rebars, wire rods and structural were also in a tight range with slight fluctuations.
The almost flat trend of steel prices impacted sponge iron prices and trade last month.
- Lower offers: Because of little buying interest, the market saw few inquiries and trade. The decrease in steel prices resulted in fewer purchase inquiries, which forced producers to float offers at lower levels.
- Muted trade amid festivities: October was the month of festivals in India. The market remained slow as participants retreated to celebrate festivals like Dussehra, Diwali, Chhatt Puja etc. Buying activity slowed down, resulting in a fall in trade volumes.
Outlook
Sponge iron prices are likely to remain under pressure in the near term, owing to a dip in the conversion spread (from sponge iron to billets/rebars) and lower steel demand. Higher imports of substitute products like scrap and pig iron may also cap a rise in sponge prices.
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