Sponge Iron (DRI) price looked stable at present level and expected to increase further on high input cost and anticipation of increase in furnace production.
SteelMint in talk with small scale manufacturer learned that selling pressure on sponge iron is limited amid continue demand from North and West India due to scrap shortage. Also stable cost of Iron ore and Coal has limited scope for manufacturer to reduce prices in short term. M-o-M DRI price has surge by INR 1,000-2,000/MT (US$ 15-30) where as MS Billet price surge by INR 2,500-3,500/MT (US$ 35-50).
Below are the factors which are indicating further strengthening Indian sponge iron prices in near term:
1. Increase in furnace production: Most of the manufacturers in Central & East India, who has curtail production have ramp up productions since prices of Ingot/billet began to improve. It seems that, similar trend may also follow in West and South India. Recent Maharashtra based hot rolling mill owners (around 10-12 plants) have increase production from 1st of Jan’17.
2. Positive Sentiment: Large scale steel manufacturer are planning to raise Finish long and Flat steel prices by INR 3,000-4,000/MT for Jan’17 delivery. Many manufacturers are anticipating positive trend will further increase prices of small scale manufacturer minimum by INR 2,000/MT.
3. Rising raw material prices: In the last week of Dec’16, the Essel mining has increased Iron ore prices up to INR 275/MT. It is anticipated that rest of miners in Odisha may also follow suit. Similarly, in last couple of weeks pellet prices across key markets increased by INR 150-400/MT. In addition coal prices are also high in the Indian domestic auctions & in the global RB2 offers.
4. Higher prices of substitute products: Smelters in Indian market timely prefers to change their melting proportion of sponge, scrap & pig iron. In present time prices of both substitute products like scrap & pig iron are in increasing mode. Pig iron prices are rising due to fewer suppliers in the domestic market and scrap prices are rising due to strong semis prices and higher imported scrap prices.
Source: SteelMint Research
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