SteelMint in conversation with standalone sponge manufacturers learned that current trade prices of sponge iron are much lower than the input cost due to recent hike in coal, iron ore & pellet prices.
On an average, Indian coal prices surged by INR 500-700/MT, while iron ore prices of few major Odisha miner’s increased upto INR 400/MT towards end Nov’19. Hence the production cost of sponge makers grew by about INR 1,000/MT (USD 14). However in the same duration domestic sponge iron prices are more or less firm with marginal change of INR 200-400/MT.
Participants expect sponge prices to find support due to hike in production cost along with rising scrap prices globally amid tight supply.
Current trade reference sponge P-DRI prices in Raipur learned at INR 16,600-16,700/MT, while the production cost learned at more than INR 18,000/MT; ex-plant.
Similarly in Odisha, where input cost of Sponge C-DRI learned at near to INR 17,500/MT, however presently trades are taking place at INR 16,500-16,700/MT; ex-plant.
Thus, anticipations are high about increase in sponge prices by near about INR 1,000/MT if looking to production cost. However average demand remains a major concern for the manufacturers, which in turn slight change in prices since a month’s duration.
Sharing outlook, a key price trend setter in Odisha, East India stated “there is no scope for further major fall in prices, considering current input cost against cheaper sponge trade price.”
Meanwhile in Southern India, Bellary the sponge manufacturers are cautious and holding sales at low offers & deals learned at firm offers of INR 16,700-16,900/MT ex-plant, for P-DRI.
Sponge iron export demand remained limited on high offers, however deals are taking place at firm offers of around USD 240/MT ex-mill, eastern region, this is equivalent to USD 270-275/MT CPT Benapole (dry port of India & Bangladesh), for sponge C-DRI.
Tentative Production Cost of Sponge P-DRI in Central India (Standalone Plant)
| S.no | Particulars | Raipur |
| 1 | Pellet (Fe 63%) | 6,200 |
| 2 | Freight Cost | 200 |
| 3 | Landed Pellet Cost to Sponge Plant | 6,400 |
| 4 | Total Pellet cost (Proportionate of Pellet 1.45) | 9,280 |
| 5 | Coal Cost (RB2) Landed | 8,270 |
| 6 | Total Coal Cost (Proportionate of Coal is 0.9) | 7,443 |
| 7 | Process cost (Factory,Maintenance,Power) | 1,800 |
| 8 | Sponge P-DRI production cost (ex-plant) | 18,523 |
| 9 | Selling prices (P-DRI) | 16,700 |
| 10 | Margin | -1,823 |
Cost excluding interest
Source: SteelMint Research
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