Indian sponge prices reported 20 month high the same price levels were last seen during June 2015.
The fresh offers for 78-80 FeM C-DRI are assessed at INR 16,700-16,900/MT ex-Raipur, INR 15,800-15,900/MT ex-Durgapur, INR 14,900-15,100/MT ex-Rourkela & INR 15,800-16,000/MT ex-Bellary. The same price range was last seen on Jun 2015.
Factors for Rising Sponge Iron Prices
1. Fall in sponge iron production: The manufacturers in Central & East India are reported fall in production due to scarcity of Iron ore. In the last couple of weeks Iron ore dispatches by Odisha based two major merchant miners have temporarily halted. Similarly, in Central India where the manufacturers have postponed purchase for Iron ore by NMDC due to Increase in Iron ore prices by Miner up to 7% (INR 185/MT). Thus, limited stock of Iron ore resulted fall in production.
2. Lower availability of Pellets due to higher export realization: Iron pellets availability in the domestic market is declining due to better export realizations. The large manufacturers based in East region are largely dealing in exports. Thus, supply are less for the material which directly impact on prices and indirectly to sponge iron.
3. Higher Imported Scrap Offers: Scrap prices in the International market are on upward mode. The fresh offers for Imported HMS are assessed at USD 265-275/MT & Shredded at USD 295-300/MT; CNF India, East coast. The smelters based in coastal markets are largely procuring domestic sponge iron instead of high cost Imported or domestic scrap.
4. Falling trade of domestic scrap after demonetization: In the Indian domestic market, melting scrap trades were majorly happen through cash payment rout. Demonetization has affected the trades of domestic scrap and according to the scrap traders the trade volume for the material are still thin as the cash flow remain bearish post demonetization.
Conclusion
The prices of sponge iron are significantly on higher side in line with falling supply for the material as in the large producing states there are scarcity of raw materials i.e. Iron ore & pellet which in turn there is less suppliers for sponge and increase in prices as well.
Outlook
It seems that for in the coming short duration Indian sponge prices may remain of higher side as most of the manufacturers in Chhattisgarh (Central region) & West Bengal (East India) have poor stock of Iron ore. And also sharp increase in domestic & global scrap prices is providing additional support to higher price in sponge iron trades.
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