Indian Sponge Makers Eye on Raw Material Costing

Domestic sponge iron makers have been persistently under pressure since 3-4 months amidst high production cost and limited purchase by furnace operators, setting high price proportion to ingot/billet. This in turn has made sponge makers to eye on iron ore prices in order to reduce their production cost.

Dwindling demand from semi finish and finished markets have forced sponge manufacturers to correct their prices by upto INR 800/MT and MS billet by INR 1,300/MT W-o-W.

Despite iron ore prices remained stable in July, sponge iron prices fell INR 1,300/MT M-o-M. Besides, in order to reduce production cost, Raipur based pellet sponge manufacturers have purchased iron pellet in bulk quantity with discount of INR 400/MT.

Sources say that an Odisha government-owned pellet manufacturer recently concluded a deal of 25,000 MT iron pellet at INR 3,800/MT, for which, landed cost to Raipur is INR 5,000-5,100/MT. While, iron pellet in Odisha is being offered at INR 5,200-5,300/MT, ex-plant.

World Steel Association reported that world’s DRI production fell to 5.1 MnT in June’15 because production in India, the biggest DRI producing nation, decreased by 12.2% Y-o-Y to 1.5 MnT from 1.70 MnT in same period last year.

Future Prospects

1. Production cut by few induction operators may lead to further decline in sponge prices across India
2. Miners are likely to reduce iron ore prices for August deliveries
3. Sponge prices in southern market will further fall owing to decline in ingot/billet prices by upto INR 1,000/MT W-o-W in Maharashtra

Current Price Movement in Major Markets

Prices in INR/MT; ex-works
Source: SteelMint Research